US Inflation Data Consistent with Growing Case for December Fed Action

Stocks and the dollar grinded higher while Treasuries and swaps sold off marginally off the back of better-than-expected corporate results and US economic data.  Strong results from Home Depot and Wal-Mart boosted confidence in the US consumer, and data showed US consumer prices increased in October after two consecutive months of declines, a sign that inflation may be turning a corner.  Oil remained a drag on the headline number, which rose 0.2%, in line with analyst estimates, but core CPI, which excludes the volatile food and energy components, is now up 1.9% over the past year.  Some of last year’s large energy price declines are beginning to age out of the calculation in the coming months, which should provide a boost to the headline number.  A separate report showed US factory output increased for the first time in three months, buoyed by demand for construction materials and motor vehicles.  Both reports should keep the Fed on track for liftoff in December.

Political tensions remain elevated, but financial markets appear to be functioning normally despite the chaos caused by Friday’s terrorist attacks in Paris.  In addition to the data, scheduled Fed speakers this afternoon include both Powell and Tarullo and supply in the form of a 10-year TIPS auction.