How We’re Playing Things as the Market Absorbs Hotter October CPI

Over the last few days, we’ve updated the Portfolio’s shopping list, added International Flavors & Fragrances (IFF) and Hershey (HSY) to the Bullpen, and performed a deeper dive on TOST (TOST).

Our aim was to be ready when the market regains its footing. But following Tuesday’s hotter-than-expected CPI data for October, we’re going to remain on the sidelines a bit longer. Reason being, October CPI is going to raise questions about either the size of the Fed’s next rate hike or how many rate hikes it may deliver between December and the end of 2027.

By the numbers, month-over-month headline CPI came in at 0.4% for October, down from the 0.6% booked for September, but ahead of the 0.3% market forecast. The sequential October print for core CPI came in at 0.3%, marking the third consecutive month at that level, and warmer than the market’s 0.2% consensus expectation.

Because of the government shutdown, there are no comparative figures for October 2025, which means no year-over-year October CPI figures today. To compensate, we’ll take a page from the Fed’s playbook and look at the monthly sequential data on an annualized trailing three-month basis. What those point to is headline CPI up around 5.6% compared to 4.4% in September while the core October figure came in at 3.6% compared to 3.2% for September.

Despite the recent drop in oil prices, the step up in CPI figures and prospects for incremental price increases announced by companies in recent weeks is what is weighing on the market today.

We did see softer October Price data in ISM’s October PMI data and that should flow through to the October PPI report later this week. But as Fed Chair Warsh made plain during his last policy presser, the focus will be on progress or not in the PCE Price Index.

Based on today’s October CPI report, and because the October PCE report will be the last one for that data set before the Fed’s December policy decision, the market is gearing up for some incrementally hawkish Fed language and girding itself for the possibility of the central bank doing more.

What complicates this picture is the decline in oil prices, and the December 10 publication date for the November CPI report — one day after the Fed’s next policy decision. Gaming it out, should we see oil prices continue to trend lower in the weeks leading up to the Fed’s December 9 policy decision, it’s possible the Fed could still deliver a 25-basis point rate hike, but cite the fall in oil as a reason to collect November and December data ahead of its subsequent policy decision in late January.

All are reasons for us to pay very close attention to oil and gas prices as well as price and technical levels for the market and companies we’re considering adding to for the Portfolio.

More Pro Portfolio:

At the time of publication, TheStreet Pro Portfolio had no positions in any securities mentioned.