Stock Market Today: Stocks nudge higher ahead of 'make-or-break' inflation report

Updated at 8:01 am EST

U.S. equity futures edged higher Tuesday, while Treasury yields and the dollar held steady, as investors braced for a crucial October inflation report that could define both the Federal Reserve's near-term rate path and the fate of Wall Street's November rally. 

Stocks ended mixed on Monday in a tepid session highlighted by a record seven-day winning streak for Nvidia NVDA and more gains for the chip sector, while the S&P 500 moved in and out of positive territory while closely tracking moves in the Treasury bond market.

That dynamic is likely to repeat itself today, although on a much larger scale, as investors digest the Commerce's Department's October inflation report and its likely impact on Fed rate hike bets. 

Economists are expecting a pullback in headline price prices, with CPI falling to around 3.3% year on year, but also see core inflation holding largely unchanged at 4.1%, more than double the Fed's 2% target. Any move higher could solidify bets on a near term rate hike, which currently sits at around 25% for the January meeting, while likely triggering a corresponding spike in Treasury yields.

"The ongoing pause in rate hikes may be a recognition that the Fed is getting close to rates sufficient to bring inflation to hell over the long-term, though [Fed Chair] Powell’s comments last week warned that rates may not yet be sufficiently restrictive enough to meet that goal," said Jason Pride, chief of investment strategy and research at Glenmede.

"The Fed may be on hold, but stubborn inflation could keep monetary policy tight for longer than some hope," he added.

Data from Bank of America, however, notes that the S&P 500 has only fallen three times over the past twelve months in the wake of an inflation print, including a 0.6% decline following the September report last month. 

The group's closely-tracked Fund Mangers' Survey, published Tuesday, also suggests that around 76% of those polled have called the end of the Fed's rate-hiking cycle,  while nearly two-thirds see lower Treasury yields in the months ahead. 

Benchmark 10-year note yields were pegged at 4.620% heading into the early New York session, around 2 basis points lower from last night's levels, with 2-year notes changing hands at 5.031%.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.02% lower at 105.614.

On Wall Street, stocks are set for a muted open ahead of the CPI data release at 8:30 am eastern time, with futures contracts tied to the S&P 500 indicating a 3 point opening bell bump and those linked to the Dow Jones Industrial Average priced for a 2 point dip. The tech-focused Nasdaq is called 35 points to the upside.

Stocks were similarly cautious in overseas trading, as well, Europe's Stoxx 600 rising 0.06% in early Frankfurt trading, and holding onto gains following a second reading for third quarter GDP that should a 0.1% contraction for the world's biggest economic bloc.

Overnight in Asia, the region-wide MSCI ex-Japan benchmark was up 0.28%, with stocks in China getting another optimistic boost ahead of President Xi Jinping's meeting with President Joe Biden at the APEC summit in San Francisco. 

Japan's Nikkei 225, meanwhile, edged 0.34% higher as the yen held near a fresh one-year low of 151.68 against the U.S. dollar despite hints of intervention from Finance Minister Shunichi Suzuki.

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