S&P, Nasdaq, Dow see limited movement as they digest the latest CPI figures

Major market averages look for direction on Tuesday as Wall Street received the latest round of retail inflation figures.

Early on and the S&P 500 (SP500) was near even, the Nasdaq Composite (COMP.IND) was +0.1%, the Dow (DJI) was +0.1%.

November CPI inflation data nudged up 0.1% M/M versus the 0.0% consensus figure. Core CPI, excluding food and energy came in at +0.3% M/M, in line with the +0.3% expected level.

The FOMC will be watching the numbers as they begin their two-day rate meeting.

“Stepping back from the huge noise in the monthly CPI numbers, though, it’s clear that most of the disinflationary trends that the Fed wants to see are already in place. Rent inflation is still high, at 6.9% in October, but it is slowing steadily as new leases are passing into the CPI numbers.”

The U.S. “is likely to follow the developed economy trend of slowing profit-led inflation,” UBS’ Paul Donovan said. “Consumers are increasingly fighting back against the creative excuses companies have been using to justify price increases.”

“Profit-led inflation often ends quite suddenly; and because it is irrational and infrequent, mathematical models underestimate its impact.”

Rates were lower. The 10-year Treasury yield (US10Y) fell 1 basis point to 4.23%. The 2-year yield (US2Y) rose 2 basis points to 4.73%.

“The second highlight (today) will be the 30yr US Treasury auction,” Deutsche Bank’s Jim Reid said. “Last month’s 30yr auction drew a yield of 4.769%, which was 5.3bps above the indicated pre-sale level, and only one other 30yr auction in the last decade has had a tail around those levels.”

“That led Treasury yields to soar in the immediate aftermath, rising by over +21bps on the day at one point, before settling up +15.0bps. Clearly things have moved on since then with the massive bond rally, but it’s one to keep an eye on today.”