After Federal Reserve Governor Christopher Waller voiced support for another rate hike in December, the strong rally that had lifted US equities earlier in the session began to fade on Tuesday. Investors are also bracing for the release of the latest US inflation data. As of writing, Dow futures were up 0.36%, S&P 500 futures had gained 0.12%, while Nasdaq futures slipped 0.19%. The pan-European STOXX 600 rose 0.7%, led by banking and industrial names, and now sits less than 1% below its all-time high. Earlier, the MSCI Asia-Pacific equity index followed Wall Street's Monday advance, climbing 1.9%.

CPI data due imminently

Investors are now waiting for the US Consumer Price Index (CPI) report due later on Tuesday, and will then turn their attention to Friday's Producer Price Index (PPI) release. Tuesday's inflation report will show how far elevated energy costs have passed through into broader prices. According to a survey of economists, headline CPI is expected to rise 0.3%, down from the previous 0.6% increase, which was the largest monthly gain since April. Core inflation may also cool, with core CPI expected to slow to 0.2% month over month from 0.3% in the prior month.

Waller turns hawkish, backs a 50 basis point hike

Just hours before the data release, Fed Governor Waller struck a notably hawkish tone. He said that if October core CPI comes in at 0.3% month over month or higher, he could support a 50 basis point increase in December. If inflation data improves relative to September, he would still back a 25 basis point hike in December. Waller argued that US inflation remains too high and that September's inflation figures were disappointing. He had previously been willing to pause further tightening at the October meeting, but now stresses that the key issue is that the Fed must deliver on its previously pledged rate hikes within a reasonable timeframe. He is particularly concerned about the breadth of price increases, believing inflationary pressures persist across multiple sectors and are far from a reassuring level. It is worth noting that Waller is a highly influential Fed governor, and since 2021 his policy views have been regarded as a key leading indicator of the Fed's policy direction. In September he was willing to give the disinflation trend more time, but his stance has now clearly shifted. Following his remarks, market-implied odds of a December rate hike jumped to 99%, with roughly 1% of that probability tied to a 50 basis point move. Treasury prices briefly rose, but the rally faded as Waller expressed support for a 25 basis point hike next month while keeping the door open to a larger move. As traders began to fully price in a December hike, the two-year Treasury yield climbed 4 basis points.

A wave of earnings ahead

This week, a number of technology companies will report results, including CoreWeave. The company is seen as an important gauge of investor anxiety about the AI sector. With lingering concerns over the cost of building AI infrastructure and whether related investments can generate profits, tech earnings will once again be put to the test. Meanwhile, investors are also awaiting the launch of a blockbuster initial public offering (IPO) from Anthropic PBC. The developer of the Claude chatbot could formally kick off its IPO roadshow as early as Tuesday, even after last week's market selloff and a sharp jump in volatility. Investors believe that, amid intensifying market scrutiny, the success of this IPO is crucial to sustaining the AI investment boom. Olivier David of Vega Investment Solutions said: "Anthropic's IPO is critical to the future trajectory of the AI trade, and the risk is asymmetric: if the listing fails, the market will take a heavy hit; if it succeeds, it merely means the current AI trade can continue." Bloomberg market strategist Mark Cranfield said: "The next question is how much of a discount Anthropic is willing to offer investors on its shares. Will the company choose relatively modest pricing to leave room for a first-day pop, or will it push the offering price as high as possible to maximize fundraising? Equity traders clearly prefer the former, because if the first-day performance is a success, the market has a greater chance of extending positive sentiment."

SoftBank Group reported its first net loss in nearly two years as concerns about AI spending and demand weighed on its major holdings. Meanwhile, Taiwan Semiconductor Manufacturing (TSM) reported a 60% year-over-year jump in October sales, and its shares closed at their highest level in a week. Linh Tran, an analyst at XS.com, noted: "It is still too early to be overly optimistic, because the AI industry could face stricter regulation after the midterm elections, and that possibility continues to create uncertainty for tech stocks. For the rally to continue, companies still need to prove that massive AI investment can translate into sufficiently convincing profit and cash flow growth."

Oil falls below $90

As optimism grows over a potential Middle East peace agreement, international oil prices extended their decline, with Brent crude falling below $90 a barrel for the first time since August. Joost van Leenders, senior investment strategist at Van Lanschot Kempen Investment Management in Amsterdam, said: "The midterm elections changed the political environment Trump faces... That may mean he is more likely to want a deal with Iran before Congress further restricts his room for maneuver."

Gold accelerates lower, closing in on $4,050

Spot gold fell 1.57% to $4,075, with the decline accelerating during European hours to a low of $4,068, a daily drop of nearly $70. The market is awaiting US inflation data for more clues on the Fed's future monetary policy path. Kyle Rodda, senior financial market analyst at Capital.com, said: "The market is simply seeing some normal fluctuations. Gold is pulling back from highs touched during the US session, which may be due to profit-taking." Rodda said: "If the US continues to avoid escalating Middle East conflict and thereby pushes oil prices lower, that would be very favorable for gold, because oil price changes affect the dollar, inflation and market expectations for interest rate moves."

Stocks in focus

Aerospace manufacturer Rocket Lab reported an adjusted EBITDA loss of $18 million for the third quarter, and its shares fell nearly 6%. Investment bank Jefferies upgraded Riot Platforms to buy from hold, and the stock rose nearly 2%. Sanmina shares surged 19% after its guidance beat market expectations. Take-Two Interactive's fiscal second-quarter earnings and revenue both beat analyst estimates, sending the stock up 4%. Hims & Hers Health fell 2% after issuing fourth-quarter guidance weaker than market expectations. HVAC solutions maker Aaon climbed 17.24% after reporting record 2026 third-quarter results, restating its 2026 first- and second-quarter financial statements and raising its full-year guidance. Cybersecurity firm Qualys reported results that beat analyst expectations, but its shares still fell nearly 7%, because its growth guidance did not show enough signs of acceleration. Casella Waste Systems shares dropped more than 5% after its quarterly results missed market expectations. Securitize (SECZ) rose about 10% on strong third-quarter results and its move into asset-backed finance. Skydance, the entertainment conglomerate formed by the merger of Paramount and Warner Bros. Discovery, fell more than 2% after announcing a three-year cost-cutting plan. The company will cut marketing spending and integrate its streaming and broadcast businesses. Taiwan Semiconductor Manufacturing (TSM) shares edged higher after October revenue surged nearly 60% year over year.