The first trading day of the week came to a tense close, especially for those keeping an eye on the S&P 500. 

Despite rallying on Friday, November 10th, trading on Monday, November 13th, closed lower as investors and analysts waited for a critical report that could show what direction the US Federal Reserve will take regarding inflation.

Market watchers are keeping an eye out on the latest Consumer Price Index (CPI) which is expected to be released on Tuesday, November 14th. Some experts foresee a possible increase of 3.3% for the October report, marking a slight improvement from the 3.7% reported in the previous month. However, it is expected that core prices reported in September have not moved since the last data release.

Why is the CPI Critical?

Along with the monthly and quarterly jobs reports, CPI readings are one of the more serious factors affecting the financial sector. Both reports are seen as signposts with regard to the Fed’s next moves.

The October CPI is particularly critical as the market hopes that data will show that the Fed will soon rein in its seemingly constant rate hikes. But for Northwestern Mutual Wealth Management Company chief portfolio manager Matt Stucky, this is only possible if inflation has dropped significantly even as the job market continues to cool.

Another Factor Comes Into Play

But while many investors held their breath in anticipation of the CPI reading, JonesTrading’s chief market strategist Michael O’Rourke opines that a much weaker US credit outlook could also determine where Fed policy goes from here. 

As of Friday, November 10th, Moody’s lowered its outlook on the US credit rating. Pointing out major fiscal deficits as well as greater issues regarding debt payments, Moody’s outlook has gone from “negative” to “stable.”