Stocks Closed Higher Yesterday, All Eyes On This Morning's PCE Inflation Report

Market Moves You Need to See Stocks Closed Higher Yesterday, All Eyes On This Morning's PCE Inflation Report [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks Closed Higher Yesterday, All Eyes On This Morning's PCE Inflation Report Stocks closed higher yesterday ahead of today's inflation report. This morning's Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge, is expected to show headline inflation up 0.1% m/m vs. last month's 0.2% pace, while the y/y rate is expected to tick down to 2.3% vs. last month's 2.5%. The core rate (ex-food & energy) is expected to be up 0.2%, in line with last month. The y/y rate is expected to tick up to 2.7% vs. last month's 2.6%. As you know, the Fed cut interest rates last week by 50 basis points. That was the first change in 14 months (after holding rates steady), and the first cut in 4½ years. And the Fed has more cuts planned with forecasts for another 50 basis points by year's end (which would bring the Fed Funds midpoint rate at 4.4%), with next year dropping all they down to 3.4%. The Fed has made "significant progress" in bringing down inflation. So much so that they believe inflation risks have receded. Nonetheless, we are not at their 2% target yet. And every data point counts, given their insistence that they will remain data dependent. Hence the importance of today's PCE reading. But while inflation risks have fallen, labor market risks have risen. And that's why next week's (Friday, 10/4) Employment Situation report could very well be even more important than today's inflation report. In other news, the Swiss National Bank yesterday cut interest rates by another 25 basis points. That was their 3rd cut this year, putting their key interest rate at 1.0%. That comes in the wake of the European Central Bank (ECB) cutting rates by 25 basis points to 3.5% the other week. That was their second time doing so. It also comes on the heels of China's announced stimulus measures that they reported on Tuesday, which includes cutting bank reserve requirements by 50 basis points by year's end, cutting the 7-day repo rate by 0.20 percentage points, and a likely cut of 0.20%-0.25% in the loan prime rate. Back in the states, yesterday's third and final Q2'24 GDP estimate came in as expected at 3.0%. Weekly Jobless Claims fell by -4,000 to 218,000 vs. last month's 222K and views for 224.5K. Durable Goods Orders were flat at 0.0% m/m vs. last month's 9.9%. Ex-Transportation it was up 0.5% vs. last month's -0.1%. And Core Capital Goods were up 0.2% vs. last month's -0.2%. The Pending Home Sales Index was up 0.6% m/m vs. last month's -5.5% and estimates for 3.1%. The Index itself was at 70.6 vs. last month's 70.2. The Kansas City Fed Manufacturing Index slipped to -8 from last month's -3. And Corporate Profits (after-tax) were up 14.2% y/y vs. last month's 11.2% print. With inventory & consumption adjustments it was up 10.8% vs. last month's 6.6%. In addition to today's inflation report, we'll also get the International Trade in Goods report, Retail and Wholesale Inventories, and Consumer Sentiment. But the Personal Income & Outlays report (which includes the PCE index), will be the main event. That comes out at 8:30 AM ET. With only one more day to go, the big three indexes are all higher for the week, so far. If they can do it again, that'll make it 3 up weeks in a row. And a friendly PCE report today could help make that happen. 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