Stock Market Today: Stocks edge lower with key CPI inflation data on deck

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U.S. equity futures edged lower in early Wednesday trading, while Treasury yields moved higher and the dollar steadied, as investors looked to a key inflation reading that could accelerate repricing of the so-called 'Trump Trade' and test the market's solid post-election rally.

Stocks ended lower across the board Tuesday, with the S&P 500 passing the 6,000 point market in early trading only to give back all of those gains and end 0.3% lower on the session a surge in Treasury bond yields blunted risk appetite.

Benchmark 10-year note yields climbed 12 basis points from late Friday levels, and were last marked at 4.422% in early New York dealing, as markets adjusted for the President-elect Donald Trump's sweeping election victory and the impact of his trade, tax and spending policies on US. borrowing costs.

That adjustment will get another tweak today with the publication of the Commerce Department's October CPI inflation report, which is expected to show further increases in both core and headline prices pressures that could challenge market bets on an end-of-year rate cut from the Federal Reserve.

The CME Group's FedWatch tool pegs those odds at around 62%, down from as high as 85% last month, and a hot inflation reading could pare that even further as the economy continues to outperform forecasts over the final months of the year.

"Following the election there are also questions as to the extent and timing of the Trump administration's tariff agenda and the ensuing effect on prices and inflation, which would impact the dollar," said Quincy Krosby, chief global strategist for LPL Financial.

"Inflation-related data releases take on heightened importance as markets try to ascertain whether the Fed can, absent weakness in the labor market, deliver the rate cut cycle it had expected just a few months ago - and whether the already extended market can withstand the possibility that the Fed could remain higher for longer," she added.

Stocks are also facing concern that the post-election runup has stretched overall market valuations, with the S&P 500 now trading at a 22.2x multiple to forward 12-month earnings projections, a level that could prove difficult to maintain if the economy slows, profit growth tapers and inflation reaccelerates.

That's weighing on futures heading into the start of the trading day on Wall Street, with the S&P 500 called 68 points lower from last night's close and the Dow Jones Industrial Average priced for a 65 point pullback.