Muted Inflation Report Pushes Stocks to New Heights

The federal government shutdown shut off the steady stream of economic reports relied on by investors to gauge the health of the economy and financial markets. However, the much-anticipated September Consumer Price Index (CPI) report was released last week, as it was needed to determine cost-of-living adjustments for Social Security payments. Consumer prices were expected to climb 3.1 percent for the year, but increased just three percent. The monthly rate came in at 0.3 percent, versus expectations of 0.4 percent. Inflation is still considerably above the Federal Reserve’s 2% target, but is seen as tame enough to keep the Fed on track to cut the benchmark interest rate two more times before year’s end. The report pushed the major stock indices to new record highs, and also helped the Bloomberg Aggregate Bond Index to a positive week. Lower rates have enabled the bond index to register a very healthy 7.7 percent gain for the year to date.

Earnings releases also contributed to the market’s continued strength. Coca-Cola’s stock jumped four percent after the company reported strong revenue and profit growth. Revenue jumped six percent, while operating profit surged eight percent. Coca-Cola Zero Sugar was a standout with case volume up 14 percent. 3M also delivered a strong report, with sales growing three percent and earnings per share jumping 10 percent. The results helped the stock gain seven percent.

Meanwhile, General Motors enjoyed its best day in five years, jumping more than 15 percent. The company reported strong Q3 results, raised full-year earnings guidance, and projected 2026 results would be even better than 2025. Tariff concerns have weighed on the auto sector, but Q3 impacts for GM were less than expected, and new tariff agreements could provide additional relief.

Apple doesn’t report earnings until October 30, but its stock rallied to a record high following positive iPhone reports. Strong demand for the iPhone 17 has sales tracking far ahead of those of the iPhone 16, and sales were strong in both the US and China. With just a 5.3 percent gain since the first of the year, Apple’s stock continues to lag the major market averages. But the stock has recovered a lot of ground in recent months, jumping 23 percent over the last three months while the S&P 500 has moved just seven percent higher.

In addition to Apple, this week brings reports from tech giants Microsoft, Meta, and Alphabet. If that weren’t enough, the Federal Reserve meets on Tuesday and Wednesday. It is expected to cut its benchmark interest rate by a quarter of a percentage point, as it did in September and is expected to do again in December.