Inflation follows a stronger jobs report
Economists expect October consumer prices to rise 0.3% from September, both overall and excluding food and energy. The report is due November 10, followed by producer price data Friday. ING considers a 0.3% CPI increase sufficient to make a December rate hike the more likely outcome.
One usual measure will be missing: According to Morningstar, the Bureau of Labor Statistics will not publish October's year-over-year inflation rate because last year's government shutdown left a gap in the data.
The latest employment report shifted rate expectations toward tightening. October payrolls increased by 165,000, well above forecasts, and unemployment unexpectedly declined to 4.1%. Hourly earnings averaged $38.00 after a 0.4% monthly increase, leaving them 3.1% above a year earlier. Revisions lifted August's job gain to 186,000 and September's to 60,000, a combined upward adjustment of 84,000. Following the release, the two-year Treasury yield climbed from 4.46% to 4.51%.
CME FedWatch puts the probability of a quarter-point December increase close to 80%. LSEG's federal funds futures data show a similar probability for the December 8-9 meeting, with roughly two additional hikes priced in over the remainder of the cycle.
The Fed's October 28 decision left the federal funds target at 3.75%-4.00%. The vote was 10-2, with Governor Lisa Cook and Cleveland Fed President Beth Hammack favoring a quarter-point increase. The preceding hike, on September 16, passed unanimously, 12-0. A December increase would take the range to 4.00%-4.25%.
Monex macro research chief Nick Rees expects markets to have almost fully priced in a quarter-point hike before the December meeting unless October CPI is substantially weaker than forecast or November payrolls deliver a major downside surprise. San Francisco Fed President Mary Daly, who does not vote on the policy committee this year, has said further increases are needed and price control must take priority. St. Louis Fed President Alberto Musalem said Friday that inflation remains businesses' leading concern in his district.
That outlook is not settled. Traders had reduced hike expectations as technology stocks fell and AI demand prospects weakened. Oxford Economics senior U.S. economist Matthew Martin said the employment figures support a December increase, but continued declines in tech stocks and oil could eliminate the prospect of additional hikes in early 2027.
AI earnings face a shaken market
Thursday's losses left investors questioning both the cost of AI infrastructure and the returns it can generate. The S&P 500 technology sector dropped 7.3%, while the Philadelphia Semiconductor Index lost 12.2%. Each suffered its worst single-day decline in more than six years. A 5.5% Nasdaq Composite slide took that index nearly 12% below its October record, putting it in correction territory.
Friday brought a partial recovery: The semiconductor index gained 4.2% and the Nasdaq rose 1.09%. The broader S&P 500 advanced just 0.31%, with market breadth still weak, and finished the week down about 2.7%.
Rising data-center construction costs have intensified scrutiny of whether AI capital spending will produce revenue and profit. Following the midterm elections, energy consumption, environmental effects and local community concerns have also become prominent political issues, raising investor worries about tighter regulation and project approvals. Truist Advisory Services Chief Investment Officer Keith Lerner said technology's one-month performance gap against the S&P 500 was the widest since May 2002, reflecting investors' retreat from the sector and limited buying interest.
Upcoming results from AI cloud provider CoreWeave, chip-equipment maker Applied Materials and networking supplier Cisco will offer another test of demand. CoreWeave is especially important to the financing of AI data-center development. After a sharp decline in its shares, investors will examine borrowing costs, construction and delivery progress, and customer commitments for evidence of a slowdown.
CoreWeave's third-quarter report is scheduled for after the U.S. market close on Tuesday, November 10, with its earnings call at 5 p.m. Eastern. According to Pip Theory, the company's guidance calls for revenue between $3.45 billion and $3.6 billion, compared with the Zacks consensus estimate of $3.54 billion. It also projects adjusted operating income of $200 million to $260 million, interest expense of $860 million to $940 million, and capital spending of $11.5 billion to $13.5 billion. Its debt stood at about $35 billion at the end of June.
Selling has extended beyond institutions. Vanda Research recorded the heaviest retail net selling since the COVID-19 pandemic on Thursday. Options strategists are not yet convinced the market has bottomed: Explosive Options' Bob Lang is watching the CBOE put/call ratio, which reached 1.2 Thursday against an average of 0.6. Freedom Capital Markets' Jay Woods wants to see the VIX exceed 30 before judging that panic selling has run its course; it was around 24 Friday.
Hormuz risks complicate the inflation outlook
Oil markets are balancing diplomatic efforts against renewed military action. President Trump confirmed that U.S. forces carried out limited strikes Friday against air-defense facilities on Iran's Qeshm Island, near the Strait of Hormuz. It was the week's second U.S. attack on Iran-related targets. U.S. Central Command also announced a special task force intended to extend the maritime blockade of Iran to overland trade routes. On Saturday, Iran reported that a tanker had hit a mine and caught fire in the eastern strait.
Qatar is seeking a temporary U.S.-Iran arrangement under which Washington would lift its blockade of Iranian ports and release some frozen assets. Iran would allow international inspectors into bombed nuclear sites and progressively restore shipping through Hormuz. Qatar's prime minister said Doha had spent weeks working with U.S. officials seeking de-escalation, had support from voices inside Iran, and remained in contact with the Trump administration after the midterms.
Progress in negotiations and hopes for restored supply had driven oil sharply lower during the week. Brent futures settled Friday at $98.32 a barrel after being down as much as about 17% during the week; WTI's weekly decline was 12.06%. Both recorded their largest weekly losses since April. Reports of the renewed strikes and tanker incident prompted prices to rebound.
About one-fifth of global oil and liquefied natural gas shipments pass through Hormuz. Further escalation could disrupt energy supplies and raise shipping costs, adding inflation pressure just as the Fed weighs another rate increase.
Abu Dhabi talks resume without high expectations
Russian President Vladimir Putin confirmed that Russia, the United States and Ukraine will meet in Abu Dhabi, United Arab Emirates, on November 10-11. The agenda includes security guarantees, de-escalation and a peaceful resolution of the conflict.
Andriy Budanov, head of Ukraine's presidential office, said he did not expect a breakthrough, although he viewed the return to face-to-face discussions after several months as progress. Analysts generally see scope for interim agreements on less contentious matters, including prisoner exchanges and humanitarian corridors, while territorial disputes and a comprehensive ceasefire remain difficult to resolve.
Gold's $4,000 level draws scrutiny
Gold enters the inflation-data week after its strongest weekly gain since August. Spot prices slipped 0.4% Friday to about $4,070 an ounce but rose 5% over the week. Silver gained 5.73% for the week. Both metals broke three-week losing streaks.
Blue Line Futures Chief Market Strategist Phillip Streible said stronger inflation readings would reinforce expectations of a December hike and push gold below $4,000. He nevertheless believes this could be its last correction, arguing that the election results have weakened AI-related economic activity and that the resulting slowdown should eventually force the Fed to abandon tightening.
Saxo Bank's Ole Hansen expects the $4,000 level to hold, but sees little prospect of a strong near-term advance because trend-following buying appears largely exhausted. FOREX.com analyst Fawad Razaqzada also identifies $4,000 as the key level, warning that a renewed break below it could bring another wave of selling.
Goldman Sachs has lowered its year-end gold targets, citing the Fed's hawkish stance and an expected December hike. Its end-2026 forecast is now $4,150 an ounce, down from $4,650; the end-2027 target is $4,800, reduced from $5,400. The bank still anticipates central-bank purchases of about 60 metric tons a month through 2026 and 2027.
The World Bank's October Commodity Markets Outlook projects annual average gold prices of $4,600 an ounce in 2026, up 33.6% from 2025, followed by $4,250 in 2027 and $4,000 in 2028. Its silver forecasts are $70 an ounce in 2026, $62 in 2027 and $58 in 2028.
Other releases on the calendar
The public economic calendar, listed in Beijing time, places China's October year-over-year CPI, the eurozone's November Sentix investor confidence index and U.S. September monthly wholesale sales on Monday. Tuesday adds the U.S. October NFIB small-business confidence index alongside CPI and the start of the Abu Dhabi talks.
Wednesday's schedule includes the EIA's monthly Short-Term Energy Outlook, a U.S. 10-year Treasury auction and a speech by Kansas City Fed President Schmid. Thursday brings the preliminary year-over-year estimate of UK third-quarter GDP, U.S. initial jobless claims and October existing-home sales. Friday's releases include October U.S. PPI, revised year-over-year eurozone third-quarter GDP and the IEA's monthly oil market report.
