S&P 500 Analysis: Jobless Claims Down but Inflation Holds, Powell’s Remarks Awaited

Wall Street Subdued Ahead of Powell’s Speech as Producer Prices Hold Steady

Wall Street’s primary indexes moved lower on Thursday following the release of October’s producer price index (PPI) data, which matched expectations but showed slightly higher annual inflation. Investors’ attention shifted toward Fed Chair Jerome Powell’s upcoming speech, hoping for insights on the Federal Reserve’s stance for future rate cuts. The market’s focus on Powell’s comments highlights lingering uncertainty surrounding the Fed’s next steps and the broader economic outlook.

Producer Price Index and Jobless Claims Trends

October’s PPI data showed a 0.2% increase in producer prices month-over-month, aligning with forecasts, while the annual increase stood at 2.4%, just above estimates. The data suggests that while inflation is gradually moderating, it may not be declining rapidly enough to fully reassure Fed officials. The slight uptick in the 10-year Treasury yield, reaching its highest level since July, indicates heightened sensitivity to inflationary trends among bond market participants.

In the labor market, jobless claims decreased by 4,000 to a seasonally adjusted 217,000 for the week ending November 9, coming in lower than projections. This robust jobs data, combined with moderated but persistent inflation, reflects the broader resilience of the U.S. economy. However, these conditions may add complexity to the Fed’s future rate-cut decisions as it considers inflationary risks alongside economic growth.

Shifts in Rate-Cut Expectations

Following the PPI report, market-based expectations for a December rate cut by the Fed fell slightly, with the CME FedWatch tool showing a 79.1% likelihood of a 25-basis-point rate reduction, down from 82% previously. Investors remain cautious, awaiting Powell’s comments to gauge the Fed’s outlook, especially after recent statements from Fed officials suggesting inflation concerns remain. Richmond Fed President Tom Barkin’s remarks about potential inflationary pressures from rising wages and tariffs highlight these risks, suggesting that the Fed may remain vigilant about rate adjustments.

Market Movers and Sector Performance

The Dow Jones Industrial Average saw a lift from Walt Disney, which surged 7.1% following a stronger-than-expected quarterly earnings report and positive future guidance. Disney’s performance provided some support to the broader market, though the S&P 500’s consumer discretionary sector faced pressure, driven by declines in Tesla, down 2.5%, and Amazon, down 0.7%. In a notable development, Tapestry’s shares soared 13.6% after the company terminated its acquisition of Capri Holdings, which led Capri’s stock to a 5% gain.

Across sectors, consumer discretionary fell 1.19%, while industrials slipped 1.36%. Technology stocks saw a modest 0.21% increase, and utilities rose 0.49% as investors shifted toward more defensive holdings. The broader S&P 500 recorded 24 new 52-week highs and nine lows, reflecting some divergence in market sentiment as focus narrows on quality stocks and cautious optimism around key sectors.

Market Forecast: Cautious Optimism Amid Fed Signals

Traders should prepare for continued volatility as the market digests Powell’s remarks and further data on inflation and employment. The outlook remains cautiously bullish, given steady corporate earnings, though inflation risks may temper aggressive buying in speculative sectors. Investors are likely to stay selective, focusing on defensive and quality stocks while awaiting clarity from the Fed’s December meeting. A clearer dovish shift from Powell could provide a near-term boost, but lingering inflation concerns may keep upside potential restrained.