LIVE MARKETS-Two-fer Tuesday: CPI, small business sentiment

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TWO-FER TUESDAY: CPI, SMALL BUSINESS SENTIMENT

Following a mysterious pattern, once again, Tuesday offered investors two economic reports, this time concerning consumer prices and small business sentiment.

Starting with the former, the Labor Department's Consumer Price Index (CPI) USCPI=ECI, which tracks the prices urban consumers pay for a basket of goods and services, increased by 0.4% in October. That's cooler than September's 0.6% growth, but hotter than the 0.3% analysts expected.

Core CPI — which strips out volatile food and energy prices and is often referred to as "underlying inflation" — landed at 0.3%. That's higher than the 0.2% consensus and a repeat of September's rate.

Year-on-year growth figures were unavailable — an echo from last year's government shutdown during which time much official economic data simply wasn't reported.

"(The data) is a bit hotter than we were looking for," Peter Cardillo, chief market economist at Spartan Capital Securities, tells Reuters. "This just simply means that a rate hike in December it's on its way. The question is, will it be 25 or 50 basis points?"

Indeed, prior to the release, financial markets had priced in a near-certain 98% likelihood that Warsh & Co will implement a 25-basis-point rate hike at the conclusion of its December meeting. That has shifted, with a growing 15% probability of a double-sized 50 bp hike added to the mix, according to CME's FedWatch tool.

Line-by-line, a 0.7% monthly increase in energy prices and the related 1.0% drop at the gasoline pump were both hotter than the headline but significantly cooler than September's respective 5.2% and 9.1% readings.

The closely watched shelter component rose by 0.3% from September, while services increased by 0.4%.

Food prices jumped 0.5% and housing fuels/utilities rose by 0.6%.

This, of course, marks the final pre-midterm CPI report, and gives some credibility to the argument that the blue tsunami was largely the result of the cost of living squeeze.

Changing gears, the mood among small business owners in the US soured nominally last month, according to the National Federation of Independent Business (NFIB).

NFIB's Optimism Index USOPIN=ECI shed 0.1 points to 97.8, just shy of its 52-year average of 98.

The Uncertainty Index dropped 6 points to its lowest level since December 2025.

Concerns about inflation and sales abated, as did labor quality — although labor quality remains the "most important problem," according to survey participants.

Tax worries, on the other hand, surged 10 points to become the second most pressing concern.

"Even with inflation pressures continuing to strain operations, more Main Street owners reported their businesses in good or excellent health, and actual sales improved," writes Bill Dunkelberg, NFIB's chief economist. "Looking ahead, continued strength in consumer spending will support economic growth, while persistent inflation, labor shortages, and policy risks will weigh on the small business outlook."

Interestingly, despite cooling inflation worries, the percentage of respondents who plan to raise their prices jumped to the highest level since June 2022.

As a reminder, the NFIB is a politically active membership organization whose PAC skews heavily Republican, according to the Center for Responsive Politics/opensecrets.org.

(Stephen Culp)

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