October's consumer price report tests the Fed's next rate move

What does the CPI report on Tuesday cover?

The Bureau of Labor Statistics publishes the consumer price index for October on Tuesday, Nov. 10, at 8:30 a.m. ET. The index, known as CPI, tracks what households pay for a basket of goods and services, from rent and food to gasoline.

Why it matters: Its change over the past year is the headline inflation rate most people hear about. The same release carries real earnings, which are wages after inflation. That line shows whether paychecks are keeping pace with prices.

The question for markets is whether price growth is speeding up or slowing down. Tuesday's report covers part of the answer. Data over the next few weeks may fill in the rest.

Why does the Fed care about this reading?

The Federal Reserve sets a benchmark overnight rate, now in a range of 3.75% to 4.00%. Part of its job is keeping inflation in check. Faster price growth could make officials less inclined to lower that rate. Slower price growth could give them more leeway.

The Fed's own record of its October meeting, called the minutes, comes out Wednesday, Nov. 18, at 2:00 p.m. ET. Those notes could show how officials weighed inflation against the job market when they last met.

How did stocks and bonds move before the report?

Stocks had a rough week. The S&P 500 slid 2.7% over the week. The Nasdaq-100, which leans heavily on technology companies, tumbled 4.9%.

The biggest drop came Thursday, when the S&P 500 tumbled 4.4% and the Nasdaq-100 lost 6.4%. Friday was calmer. The Nasdaq-100 jumped 1.4%, the technology sector fund gained 1.5%, and the S&P 500 rose 0.3%.

Bonds moved the other way over the week. The 10-year Treasury yield fell 8 basis points to 4.86%, after standing at 4.95% on Tuesday. A yield is the yearly interest a bond pays, measured against its price. When bond prices rise, yields fall.

How could the report move bonds and borrowing costs?

A hotter reading could push Treasury yields back up. Those yields help set borrowing costs across the economy. Quotes on 30-year fixed mortgages tend to follow the 10-year yield, and the 30-year mortgage rate stands at 7.18%.

The longer view matters too. The 10-year yield has risen 68 basis points this year, and the 30-year Treasury yield sits at 5.26%. Friday's rise in the 2-year yield, a gauge of where traders think the Fed is headed, showed how quickly the short end reacts to rate expectations.

Sectors that often trade on interest rates lost ground Friday. The real estate sector fund fell 0.7%, and the utilities sector fund fell 0.4%. A cooler CPI reading could ease pressure on yields and on those rate-sensitive groups.

Why does inflation matter for tech stocks?

Much of a technology company's value rests on profits expected years away. Higher yields shrink what those distant profits are worth today, because a safe Treasury pays more in the meantime.

That is part of why tech-heavy funds can swing harder on rate news than broad funds. The Nasdaq-100 is still up 6.9% this year, against 7.8% for the S&P 500. A hot inflation print could put more of that gain to the test; a soft one could help steady it.

What other data comes after the CPI?

Weekly jobless claims follow on Thursday, Nov. 12, at 8:30 a.m. ET. They are the most timely weekly read on layoffs. The producer price index for October, which tracks prices businesses receive, arrives Friday, Nov. 13, at 8:30 a.m. ET.

October retail sales come Tuesday, Nov. 17, at 8:30 a.m. ET, a gauge of how much shoppers spent. The Personal Income and Outlays report on Wednesday, Nov. 25, carries the PCE price index, the Fed's preferred inflation gauge. The November jobs report follows on Friday, Dec. 4.