The highlight of the day will be the release of the Consumer Price Index for September at 8:30 a.m. Eastern Time (ET). The consensus forecast calls for the headline index to rise 0.6% month-over-month and 3.6% year-over-year (following 0.4% month-over-month and 3.4% year-over-year in August), and the core index to rise by 0.2% MoM and 2.5% YoY (following 0.3% MoM and 2.4% YoY). Analysts at Freedom Broker expect the core index to be in line with the consensus, with rising fuel prices expected to be the main driver of growth in the headline index.

In our view, data in line with the consensus will not give the Fed grounds to raise rates at its October 27–28 meeting. A core CPI reading of 0.3% MoM would be a strong argument in favor of an October rate hike, but it would not guarantee one: data on producer prices and retail sales, expected later this week, will round out the economic picture. The PPI report is important for assessing the core PCE deflator, which the Fed uses as a guide. In addition, for October–December, we forecast weaker growth in the core CPI of 0.16–0.17% MoM.

Confirmation of our baseline forecast for a rate hike in December, with minimal need for further action in 2027, will open up significant room for a rally as sectors that have lagged behind the broader market recover. SPY is just 0.1% below its high, while the median sector is 6.5% below its high. This gap corresponds to the 97th percentile over the past five years.

Today at 2:00 p.m. ET, the Fed will release the “Beige Book,” which will include comments on price pressures and overall economic activity across the districts. In addition, Thomas Barkin, president of the Richmond Fed, will deliver a speech. WTI crude oil remains near $95 per barrel amid ongoing tensions in the Strait of Hormuz, while the energy sector (XLE) continues to hit new all-time highs, remaining the top-performing sector year-to-date (+50%).

Before the market opens, Bank of America (BAC), Morgan Stanley (MS), BlackRock (BLK), Progressive (PGR), State Street (STT), and Fastenal (FAST) will report their earnings. Bank of America will release its results around 6:45 a.m. ET, Morgan Stanley and State Street around 7:30 a.m. ET. The banking earnings reports come amid noticeable relative weakness in the sector: over the past 20 trading sessions, the KBWB ETF of major banks has underperformed the SPY by 11.1 percentage points, while the regional bank ETF (KRE) has underperformed SPY by 9.5 percentage points. This heightens the importance of management’s forecasts and comments on the business outlook.

S&P 500 futures are trading in neutral territory. We expect increased volatility and assess the risk balance as moderately positive. Support comes from the decline in Treasury yields yesterday and dovish comments from the Fed. Pressure is coming from high oil prices and the risk of an inflation surprise. The nearest support level for the S&P 500 is around 7,780 points, with resistance at 7,845 points.

What to Watch for in the Pre-Market

— ASML (ASML) shares are rising following the third-quarter earnings report, rebounding from the initial negative reaction. Revenue came in at €11.7 billion, compared with the company’s own forecast of €11–12 billion, while the gross margin was 57.5%, compared with a guidance range of 55–57%. The fourth-quarter forecast (revenue of €14.2–15.2 billion, margin of about 57%) is above consensus (€14.19 billion and 55.4%, respectively). The company has narrowed its full-year revenue forecast to €44–45 billion from €43–45 billion and expects that planned shipments in 2027–2028 will not be sufficient to fully meet customer demand, and some of them are already inquiring about orders for 2029–2030.

— GitLab (GTLB) shares are down more than 2% after Anthropic announced that it was migrating its main repository from Git to its own version control system, Scion. Anthropic representatives reported that from May through September, the number of daily code merges at the company rose from approximately 2,500 to over 30,000. However, the developers do not position Scion as a universal replacement for Git. During the main trading session on October 13, GitLab shares fell 7.2%.

— GameStop (GME) shares are up about 2% after CEO Ryan Cohen disclosed the purchase of 844,000 shares of the company at $26.75–27.00, totaling approximately $22.8 million. This is the second disclosed purchase this month: as a reminder, on October 2, it was reported that he had acquired shares worth approximately $17.1 million. Cohen’s direct ownership has risen to 42.5 million shares.

— Brookdale Senior Living (BKD) shares are up nearly 5% following the announcement that it will purchase 30 leased senior living properties from Welltower (WELL) for $290 million. The transaction will reduce cash rent payments by approximately $17.8 million in 2027 and is expected to close in the fourth quarter. Upon closing, Welltower will also extend the leases on an additional 39 properties from 2032 to 2036. The company estimates that the transactions will increase adjusted EBITDA and cash flow.

The Market on the Eve of...

Trading on U.S. stock markets on October 13 ended with a slight decline. The Nasdaq-100 fell 0.31%, the Dow Jones 0.35%, the Russell 2000 0.40%, and the S&P 500 remained virtually unchanged. There were 1.22 times as many gainers as losers on the NYSE, while the equally weighted RSP (+0.05%) and SPY (−0.01%) were virtually unchanged. The energy sector (XLE: +1.80%) led the way, spearheaded by oil refiner Valero Energy (VLO: +4.7%). Healthcare (XLV: −1.35%) was the underperformer: Johnson & Johnson (JNJ: −5.7%) beat consensus estimates for revenue and EPS, but its oncology division and MedTech segment fell short of expectations.

The S&P 500 traded within a narrow range of about 28 points. The virtually unchanged index masked notable differences within the market: mid-cap stocks rose 0.48%, while small-cap growth stocks fell 0.74%.

The bond market ended its first session following Columbus Day with yields falling at the long end: compared to the close on October 9, the yield on 2-year bonds remained unchanged (4.79%), the 10-year yield fell by 2 basis points to 5.22%, and the 30-year yield dropped by 4 basis points to 5.56%. The flattening of the yield curve coincided with dovish comments from the Fed. Federal Reserve Board member Christopher Waller noted that rising yields are cooling demand in rate-sensitive sectors and are partially doing the work of tightening monetary policy. John Williams, president of the Federal Reserve Bank of New York, considered another rate hike this year appropriate but does not yet see a need to raise rates in 2027.

The NFIB Small Business Optimism Index fell in September from 98.7 points to 97.9 points, compared with a consensus estimate of 98.2 points. According to ADP’s weekly estimate, the private sector added an average of 24,750 jobs per week in the four weeks ending September 26, compared with a revised 25,250. Existing-home sales rose from 3.93 million (revised August data) to 3.99 million on an annualized basis, compared with a consensus estimate of 3.95 million.

The SOX semiconductor index fell for the fifth consecutive trading session, marking its longest losing streak since July.

Among the bank earnings reports: JPMorgan (JPM: −0.9%) missed consensus estimates for earnings, although its fourth-quarter net interest income forecast came in above expectations. Citigroup (C: −5.6%) fell short of the consensus estimate for non-interest income, while Wells Fargo (WFC: −3.1%) missed the consensus estimate for revenue. Goldman Sachs (GS: −0.2%) beat earnings expectations thanks to revenue from investment banking and equity trading.