U.S. stocks opened lower on Tuesday following the release of an inflation report that came in stronger than expected in October, raising expectations of an interest rate hike, combined with some lingering uncertainty over a tax reform plan that is expected to be voted on this week in Congress.
Producer price inflation rose 0.4 percent in October, beating the 0.1 percent consensus, and raising expectations that another rate hike is around the corner in December, especially with crude oil prices rising higher.
The U.S. economy added 261,000 non-farm payroll jobs in October and the U.S. unemployment rate dropped to 4.1 percent following a lackluster September employment report (revised 18,000) that was well below estimates largely due to hurricanes in the Deep South.
According to CME’s FedWatch tool, there is a 91.5 percent probability of .25 percent basis point interest rate hike at the Fed’s December monetary policy meeting.
This week, lawmakers on Capitol Hill are expected to vote on competing tax reform plans in the House of Representatives and the U.S. Senate.
The House tax reform plan has the corporate tax rate falling to 20 percent in 2018 while the Senate tax reform plan has a delay in the 20 percent corporate tax rate until 2019.
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