Stocks End Higher Ahead Of This Morning's PCE Inflation Report  Image: Bigstock Stocks closed higher yesterday ahead of this morning's inflation report. This morning we'll get the much anticipated Personal Consumption Expenditures (PCE) index report, which is the Fed's preferred inflation gauge. Last week's Consumer Price Index (CPI) and Producer Price index (PPI) both showed inflation moderating, but at a slower pace than expected. And that has led to increased speculation that the Fed might very well have to raise interest rates as high as they had forecast (5.1%), or higher. Fed Fund traders had been betting that the Fed would call it quits at the 4.75%-5.00% range (midpoint of 4.88%). With the midpoint currently at 4.63%, that would mean only one more 25 basis point hike to get to 4.88%, vs. two more 25 bps hikes to get to the 5.1% level. Then after those hotter than expected inflation reports came out, Goldman Sachs increased their terminal rate forecast to a range of 5.25%-5.50% (midpoint of 5.38%), which would mean three more 25 bps hikes (1 in March, 1 in May, and 1 in June). Volatility has spiked ever since those inflation numbers came out. And this morning we'll get another one. That comes out at 8:30 AM ET. In other news, yesterday's second estimate for Q4 GDP came in a little softer than expected at 2.7% vs. the first estimate of 2.9%. And Weekly Jobless Claims fell by -3,000 to 192K vs. the consensus for 200K. The smoother 4-week moving average came in at 191.25K. Aside from this morning's PCE report, we'll also get New Homes Sales, and Consumer Sentiment. Stocks are on pace for another down week. But YTD, the Dow is up 0.02%, the S&P is up 4.50%, the Nasdaq is up 10.7%, and the Russell 2000 is up 8.34%. And since last year's October lows, the Dow is up 15.4%, the S&P is up 12.2%, the Nasdaq is up 13.5%, and the Russell 2000 is up 15.7%. All eyes will be on this morning's PCE inflation report. Best,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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