Chris Versace : Happy Tuesday, Action Alerts Plus members. Stocks are moving higher this morning, and Treasury yields are trading off as the latest piece of inflation data leans toward the Fed being done hiking interest rates. That data was found in this morning's October CPI report, which came in below expectations for both headline and, more importantly, core CPI on both a year over year and month over month basis, with far greater improvement on the headline figure due primarily to falling gas prices. But again, we knew that was going to happen.
Here's the thing, though, members, while some will point to the year over year core CPI figure still at 4%, that's the lowest reading in about a year. But, more important, when we analyze the last few months of sequential core CPI data points, we see far more progress toward the Fed's 2% target than that 4% figure indicates. That, along with the flat print for headline inflation for the month of October, is driving the market higher today.
Good news, no doubt, and it will shift our focus to when the Fed adopts even more dovish language, which we think will be an indication it is getting ready to begin cutting rates. However, in the very near term, we still have a few hurdles ahead of us. The House of Representatives is set to vote today on Speaker Johnson's two-step plan to prevent a government shutdown.
Now, that plan has some conservative opposition, which means it will need some Democrats to vote for it in order for it to move forward. Normally, the market assumes that these things in Washington will work themselves out. But if Johnson's plan doesn't pass, it raises the odds of a shutdown later this week, and we could see a mad scramble emerge to avert a shutdown, especially a prolonged one. Our thinking on all of this is that, yes, something will get passed, but we will want to see how it all plays out and what those details are.
Now, on Wednesday, tomorrow, we also have the October PPI and retail sales data, as well as several key retailer earnings. But we also have President Biden set to meet with Chinese President Xi. We've seen some niceties and related signaling leading up to that meeting, but, candidly, members, we rather doubt their conversation will lead to a dramatic improvement in tensions between the two countries.
The best outcome-- it's likely to be that more constructive conversations will be had in the weeks ahead. That said, we will be listening for any and all comments relating to Taiwan and other geopolitical tensions, AI and other chips, as well as semi-cap restrictions, and, of course, any softening for the Trump-imposed tariffs. Now, that's going to end today's rundown.
But before we go, a quick programming note-- please keep an eye on your inboxes as we navigate the busy week of data. We'll have our latest takes on, again, the PPI report, the retail sales report, and much, much more to put this economic puzzle together for you. Thanks for watching.