Stocks End Lower Yesterday, All Eyes On This Morning's PCE Inflation Report Image: Bigstock Stocks ended lower yesterday after erasing early day gains. Stocks were already in the green in pre-market trading. Then when Q2 GDP came out with a better than expected growth rate of 2.4% vs. the consensus for 1.5%, stocks rallied even more. When the market opened, most of the indexes gapped higher. But those gains were slowly given back. And by the afternoon, all of the indexes had turned negative. For those keeping score, the Dow's winning streak finally came to an end as well. After 13 up days in a row, they were on pace to tie their all-time record of 14 days back in 1897. But it was not to be. But a 13-day winning streak is still mightily impressive. In other news, Weekly Jobless Claims fell by -7,000 to 221,000 vs. views for 235K. The Pending Home Sales Index rose 0.3% m/m, in line with expectations, and much better than the previous report of -2.5%. The index came in at 76.8 vs. last month's 76.6. Retail Inventories rose 0.7% m/m, matching last month's change. Wholesale Inventories, however, slipped -0.3% , also matching last month's -0.3% change, but missing estimates for 0.1%. The Kansas City Manufacturing Index improved to -11 vs. last month's print of -12. And Durable Goods Orders (New Orders) rose 4.7% m/m vs. last month's 2.0% and the consensus for 0.5%. Ex-transportation it was up 0.6% vs. views for -0.1%. And Core Capital Goods rose 0.2% vs. last month's 0.5% and views for -0.1%. Today we'll get the Employment Cost Index, and Consumer Sentiment. But the report everybody is really waiting for is the Personal Consumption Expenditures (PCE) Index. That's the Fed's preferred inflation gauge. The headline number is expected to increase 0.2% m/m, and 3.0% y/y (vs. last month's 3.8%). The core rate (ex-food & energy), is expected to be up 0.2% m/m, and 4.2% y/y (vs. last month's 4.6%). Even though we'll get 2 more CPI and PPI inflation reports, and one more PCE inflation report (after this one), not to mention 2 more employment reports before the Fed meets again on September 19-20, every one of these reports matters. Especially when the Fed explicitly says their decisions on rates will be data dependent. That report comes out at 8:30 AM ET. We'll also get more earnings with another 60 companies on deck. Next week, we'll hear from 1,637 companies. And then another 1,625 companies the week after that. Earning season is always an exciting time since stocks typically go up during earnings season. Stocks have been on tear this year. Even so, there's still a ways to go before the major indexes fully make up for last year's bear market. But with recession fears having faded, a clearly resilient jobs market and economy, better than expected earnings, and it looking like we're nearing the end of the Fed's rate hike cycle, there's plenty of reason to believe we could see a lot more upside to go. Best, Kevin Matras Executive Vice President, Zacks Investment Research |
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