Traders in a $7 trillion market are grappling with the unprecedented scenario of having to price securities tied to US inflation without any consumer price data https://t.co/nSdGu3uNQ8 ...

Market Overview - The market is heavily focused on individual company earnings due to the government shutdown limiting macro data [1] - Averages rose due to strong company numbers and a mild CPI report, with the Dow closing above 47,000 for the first time [2] - The S&P 500 had its 34th record close [2] - The NASDAQ increased by 1.15% [2] Economic Outlook - The market anticipates a 0.25% (quarter point) rate cut by the Fed, potentially driven by a stalling economy [2] - Larger layoffs are emerging, exemplified by announcements from Target and Applied Materials [3] - The Consumer Price Index (CPI) report was tame enough to potentially justify a rate cut [3] Earnings Season Focus - The upcoming week is crucial due to the peak of earnings season, considered more important than usual [1]

Economic Outlook - Treasury Secretary Scott Bessent expressed confidence in the U.S. economy, highlighting key deflationary trends and tax policy changes that are positively impacting working Americans [1][2] - Bessent anticipates that 2026 and 2027 will be strong years for the economy, attributing this to recent tax reforms enacted by President Trump [2] Tax Reforms and Disposable Income - The recent tax reforms include no taxes on tips, overtime, and Social Security, as well as the deductibility of auto loans for American cars, which are expected to boost real income [2] - Many workers have kept their withholding levels unchanged, leading to substantial tax refunds in the first quarter of next year, which will increase disposable income [3][4] Inflation and Consumer Price Index - Bessent stated that the administration has the affordability crisis, referred to as "Biden inflation," under control, with energy prices decreasing [5] - The Consumer Price Index (CPI) is expected to show a downward trend in the coming months, with the September report delayed but anticipated to impact Federal Reserve interest rate decisions [5][6] - A significant increase in the number of CPI components experiencing price surges was noted, rising from 55% a year ago to 72%, primarily due to Trump's tariffs [6]

Inflation Trends - Monthly consumer price inflation was slightly lower than forecast, with headline inflation up 03%/10 and core inflation up 02%/10 [1] - Annual inflation is still rising, with both core and headline inflation up 3% over the past 12 months [1] - Some products experienced slowing inflation, offsetting the impact of tariffs [2] Federal Reserve Policy - Analysts believe the Fed will cut rates again [1] - The Fed's target inflation rate is 2% [2] - The Fed is expected to continue cutting rates [3] Economic Indicators - Housing, food, and car costs were notably restrained [1] - The government's measure of home prices rose at the slowest pace since January 2021 [1] - Furniture, clothing, and personal care products saw price increases due to tariffs [2] Data Collection Disruption - The government may not be able to collect price data for the current month due to the shutdown, potentially impacting the October CPI report and jobs number [4] - The absence of the October CPI report raises uncertainty about the Fed's ability to cut rates in December [4] Economic Outlook - The report suggests a k-shaped economy and a k-shaped CPI report [2][3]

Core Insights - Inflation significantly impacts household expenses, with the Consumer Price Index (CPI) being a crucial economic indicator [1] - The CPI is divided into eight categories, with food, shelter, and clothing accounting for over 60% of the index [2] - Medical care and housing have seen the fastest price growth, each increasing over 100% since 2000, while apparel has only grown about 4% [4] CPI Component Analysis - Transportation exhibits high volatility, primarily driven by motor fuel prices, which affects overall transportation costs [5] - Energy costs are integrated into housing and transportation expenses rather than being a standalone category, with energy accounting for 6.216% of total expenditures [6][7] - College tuition and fees have increased nearly 200% since 2000, significantly impacting budgets for families with college-bound students [8] Core Inflation Metrics - Core inflation, which excludes food and energy, is closely monitored by economists and policymakers, with a cumulative change of 85.6% since 2000 [11][12] - As of September 2025, the annualized rate of change for headline CPI is 3.01%, while core CPI is at 3.02% [12] Household Impact of Inflation - The effects of inflation vary widely among households, with lower-income families and those with high transportation or medical costs being particularly vulnerable [15][16] - Inflation volatility disproportionately affects households with limited budgets, making discretionary spending challenging [16]

CPI Data Analysis - Headline CPI increased by 0.3%, slightly below expectations [1] - Core CPI, excluding food and energy, also increased by 0.2%, less than the anticipated 0.3% [1] - Year-over-year CPI stands at 3%, exceeding the previous reading of 2.9% [1][2] - Year-over-year CPI excluding food and energy is also at 3%, a slight decrease from the prior 3.1% [2] Market Reaction - Interest rates are declining while stocks are rising, attributed to the CPI figures being lower than expected [2] Fed Perspective - The current CPI figures are still above the Federal Reserve's target of 2% [2] - The market sentiment suggests a slowing labor market, potentially influencing future Fed rate cuts [4] - The current CPI data may not strongly indicate that the Fed is nearing its target [4]

Quantum Computing Sector - Quantum computing stocks are experiencing significant gains, with D-Wave up 14%, ION Q up 7%, and Regetti up 10% following a report that the Trump administration is considering equity stakes in quantum companies [1] - IBM has been a long-time player in the quantum computing space, although its shares fell 1.6% after initially dropping 6% due to a slowdown in its Red Hat hybrid cloud segment, not its quantum business [2][3] IBM's Performance - IBM's Red Hat segment saw a quarter-over-quarter decrease of approximately 2%, but CEO Arvin Krishna expressed confidence in a rebound, citing a 12% increase in the AI business to $9.4 billion [3] - Investors are beginning to recognize that the situation with IBM is not as dire as initially perceived, as the stock has recovered much of its losses [3] Market Sentiment and Economic Indicators - The market is currently optimistic, with a focus on upcoming earnings reports from major companies like Intel and Ford [5][6] - The Consumer Price Index (CPI) data, expected to show a year-over-year inflation rate of 3.1%, is anticipated to influence market sentiment, although it is considered old data [9][10] - There is a strong expectation of a rate cut by the Federal Reserve, with 99% odds for an announcement next Wednesday, which is reflected in increased call buying in small-cap stocks like the Russell 2000 [11][13]

Market Sentiment - Bullish investors are favored in the market, as historical trends suggest they often prevail over bearish sentiments [1] - The market is viewed as a collection of companies rather than a random assortment of assets, emphasizing the importance of company fundamentals [1] Government Shutdown Impact - Concerns regarding the government shutdown's effect on the market are noted, but historical data indicates that shutdowns typically do not significantly impact market performance [1] - Despite the ongoing shutdown, stock averages managed to close positively, indicating resilience in the market [1] Economic Indicators - The upcoming release of the consumer price index is highlighted, with a suggestion for investors to remain calm even if the numbers are higher than expected [2] - Fears surrounding U.S.-China tensions may be exaggerated, as there appears to be a compromise despite negative rhetoric from political leaders [2] Earnings Season Insights - The initial weeks of the earnings season have alleviated some investor concerns, with many companies already accounting for tariffs in their financial reports [3] - Major financial institutions reporting low default rates on loans, despite fears stemming from regional banks revealing poor loan performance [3] Historical Market Performance - The Dow Jones Industrial Average has significantly increased from 1,000 to approximately 46,000 since the phrase "get out now" was first popularized, illustrating the long-term upward trend in the market [4]

Market Trends - The dollar has started the quarter with increased strength [1] - Traders anticipate further bullish momentum in the dollar [1] Economic Indicators - US consumer-price data release is delayed until this week [1]

Economic Outlook - Thailand's consumer price index is projected to remain below 1% until early 2027 [1] - Monetary policy alone may be insufficient to address the low inflation issue in Thailand [1]