October producer prices land at 8:30 a.m. with a December Fed hike fully priced in and the 10-year yield at a three-week high

The last major inflation report of the week arrives before the open, and the bond market has already decided what it means for December. Traders see a Federal Reserve rate increase at the Dec. 8-9 meeting as all but certain; Friday's producer price index helps determine whether that move is a quarter point or something larger.

What is expected

The Bureau of Labor Statistics releases October producer prices at 8:30 a.m. Eastern. Economists surveyed by Dow Jones expect a 0.4% rise in final demand prices for the month and 0.3% excluding food and energy, according to TradingKey, matching the consensus in a TD Economics calendar. That would be a sharp slowdown from September, when final demand prices jumped 1.3%, the largest monthly gain since March 2022, and the core measure rose 0.7%.

The yearly picture points the other way. Because of how last year's numbers compare, headline producer inflation is forecast to rise to about 6.6% from 6.3%, according to FXStreet and TradingKey; Continuum Economics expects 6.7%, which it said would be the highest since November 2022. Core producer prices are expected to hold near 5.0% year over year.

Producer prices matter to the Fed because several components, including airline fares, portfolio management fees and physician services, feed directly into the personal consumption expenditures price index, the central bank's preferred inflation gauge.

Where yields and rate pricing stand

The 10-year Treasury yield rose about 2 basis points to 5.127% early Friday, according to CNBC, and Newsquawk put the session high at 5.135%, the highest since Oct. 21. Benzinga had the 10-year at 5.12%. The 2-year yield, the maturity most tied to Fed expectations, was near 4.85%, according to both CNBC and Benzinga. CNBC said the 10-year jumped more than 13 basis points on Thursday, carrying it back above 5%.

CME FedWatch shows a December hike fully priced, CNBC and Benzinga reported. CNBC put the odds of a quarter-point move at almost 87% and a half point at around 13%; Newsquawk had 88% and 12%. The federal funds target range is 3.75% to 4.00% after a quarter-point increase in September. Fed Governor Christopher Waller said this week that a half-point increase should be on the table if core inflation stays elevated, CNBC reported, which is why the 50 basis point tail has not disappeared.

The Fed speaker lineup (times ET, per the Econoday and Wrightson ICAP calendars)

• Boston Fed President Susan Collins, opening remarks at 9:10 a.m. and an interview at 10:35 a.m.
• Dallas Fed President Lorie Logan, opening remarks at 9:40 a.m.
• Vice Chair for Supervision Michelle Bowman on supervision and regulation at 10:50 a.m.
• San Francisco Fed President Mary Daly, late morning to midday
• Vice Chair Philip Jefferson on productivity at 7 p.m.

On Thursday, New York Fed President John Williams said inflation remains far too high and the Fed still needs to do more to bring it back to its 2% goal, and Cleveland Fed President Beth Hammack called for a restrictive policy stance, according to Capital Market.

Oil and gold

U.S. crude was little changed early Friday. CNBC had December WTI down 0.1% at $88.63 a barrel, and finanzen.ch showed WTI near $88.71 after a Thursday settlement of $88.74. Brent was near $96, up about 0.3% to 0.5%, after settling at $95.82 on Thursday. Prices rose Thursday after President Donald Trump said, "We don't need a deal with Iran," according to CNA, but CNBC and Capital Street FX said both benchmarks are still heading for a second straight weekly decline.

Gold was trading around $3,890 to $3,915 an ounce in early dealing, depending on the feed, after touching its lowest level in about 13 months on Thursday, according to Capital Street FX and Tradevae. Higher yields and a firm dollar have weighed on the metal as rate hike bets have built.

The equity backdrop

Stock index futures were close to flat ahead of the data, after Thursday's modest declines: the Dow fell 0.36% to 52,297.09, the S&P 500 lost 0.35% to 7,592.40 and the Nasdaq Composite slipped 0.39% to 25,366.09, according to Reuters. A hot producer price reading would add pressure on rate-sensitive stocks and gold, while a softer one could take some urgency out of the half-point discussion.

Next week

Nvidia reports earnings after the close on Tuesday, Nov. 17. Wrightson ICAP's calendar also lists October retail sales that morning and minutes from the Fed's October meeting on Wednesday, Nov. 18.