S&P 500 Forecast: Inflation Data Sparks Fed Rate Cut Hopes – What’s Next?

Are Inflation Numbers Supporting More Rate Cuts?

U.S. stock futures remained flat on Wednesday as traders assessed the sustainability of the post-election rally and the latest inflation figures. October’s Consumer Price Index (CPI) showed a 2.6% year-over-year increase, matching expectations and offering some relief on inflation concerns. Core CPI, excluding volatile food and energy prices, rose by 3.3% annually, aligning with forecasts. Following the report, the CME FedWatch Tool indicated a high likelihood of another rate cut from the Federal Reserve next month, fueling optimism that policymakers might support further easing.

Will Moderate Inflation Keep the Rally Going?

October’s inflation data has bolstered hopes for continued rate cuts, easing fears of a shift in Fed policy that could slow the economy. The moderate 0.2% monthly rise in CPI provides reassurance for investors focused on inflation control, potentially encouraging the Federal Reserve to maintain its current pace of rate cuts. Lindsay Rosner, head of multi-sector fixed income at Goldman Sachs Asset Management, remarked that the report “cools fears of an imminent slowdown” in Fed action, a key signal for traders looking to extend the rally’s momentum.

Can Markets Regain Their Post-Election Highs?

After last week’s rally, major indexes pulled back on Tuesday, taking a brief pause from recent highs. The Dow Jones Industrial Average fell about 382 points, or 0.9%, while the S&P 500 and Nasdaq Composite slipped 0.3% and 0.1%, respectively. Markets surged last week following Donald Trump’s election, with expectations of favorable policies driving gains that pushed the Dow above 44,000 for the first time. This optimism has extended to cryptocurrencies, lifting Bitcoin past $89,000 on hopes of regulatory support. Now, traders are watching to see if this momentum can resume after Tuesday’s slight dip.

Which Stocks Are Moving in Early Trading?

Tesla continued to gain, rising 3% in premarket trading and maintaining its status as a postelection favorite, with financial stocks also slightly up. Apple was highlighted as a top 2025 pick by Evercore ISI, with analysts projecting significant gains from AI advancements in iPhones and growth in Services and Wearables.

Evercore estimates Apple’s stock could reach $300, spurred by an extended iPhone upgrade cycle and strong margins. On the other hand, Starbucks faced pressure, slipping over 1% after Redburn Atlantic downgraded it to “sell,” citing challenges in the company’s recovery strategy despite its “Back to Starbucks” growth plan.

What’s Next for the Market?

With inflation concerns easing, the market may hold a cautiously optimistic outlook for continued gains, supported by potential Fed rate cuts in December. Traders will be closely monitoring upcoming reports, including Thursday’s Producer Price Index (PPI) and Friday’s retail sales data, for further indicators of economic health. For now, stocks appear poised to remain in a bullish stance, with policy support likely to underpin the post-election rally in the short term.