Stocks End Higher, All Eyes On This Morning's PCE Inflation Report  Image: Shutterstock Stocks closed higher yesterday with all of the major indexes finishing in the green. The big three indexes each made new all-time high closes. And with one more day to go, they're poised to close higher for the week. That would make it 3 up weeks in a row, and the 12th up week out of 13 weeks. Yesterday's Q4 GDP came out much better than expected at 3.3% vs. the consensus for 2.0%. Some expected stocks to weaken on the news as it suggests the Fed may have to keep rates higher for longer given the strength of the economy. (You'll recall Fed officials saying that they believe the economy would need to grow below trend for a while to get inflation down to their target of 2%.) But stocks cheered the news as it shows the economy is strong with gains in consumer spending, business investment, and housing to name a few. This being earnings season likely buoyed stocks as well since stocks typically go up during earnings season. Before the open yesterday, Comcast, NextEra Energy, and The Blackstone Group posted positive EPS surprises of 5.00%, 6.12%, and 16.8% respectively. American Airlines also reported before the open and posted a whopping 383% positive EPS surprise and soared 10.27% yesterday. After the close, Visa reported a 3.43% positive EPS surprise, and a 1.52% positive sales surprise. Intel reported a positive EPS surprise of 22.7%, and a positive sales surprise of 1.75%. Although, T-Mobile posted a negative EPS surprise of -12.1%, but a positive sales surprise of 3.99%. However, even though they fell short of the estimates, their $1.67 EPS translated to a 41.5% quarterly growth rate vs. 4 quarters ago. Today we'll hear from American Express, Colgate-Palmolive, and Norfolk Southern to name a few. All in all, 67 companies on deck to report. Besides yesterday's GDP and earnings reports, the Durable Goods Orders report showed New Orders flat at 0.0% m/m vs. the consensus for 1.0%, but Ex-Transportation it was up 0.6% vs. views for 0.2%. Core Capital Goods rose 0.3% vs. estimates for -0.2%. Weekly Jobless Claims rose by 25,000 to 214K vs. expectations for 200K. The smoother 4-week moving average, however, came in at 202.25K, which was down from last week's 203.75K. The International Trade in Goods report showed the U.S. goods deficit shrank a bit to -$88.5 billion, in line with estimates, and down from last month's -$89.3B. Imports rose 1.3%, while exports gained 2.5%. And New Home Sales rose to 664,000 units (annualized) vs. last month's upwardly revised 615K (from 590K), and estimates for 650K. Today we'll get Pending Home Sales and the Baker Hughes Rig Count report. And, of course, the report everybody has been waiting for, which is the Personal Consumption Expenditures (PCE) index. This is the Fed's preferred inflation gauge. The headline number is expected to be up 0.2% m/m, while the y/y rate is expected to rise to 2.7% vs. last month's 2.6%. The core rate (ex-food & energy), is expected to be up 0.2% m/m as well, with the y/y rate easing to 3.0% vs. last month's 3.2%. This is essentially the last important data point before next week's FOMC announcement on January 31. If today's PCE comes in stronger than expected, that will complicate things for the Fed. Nonetheless, it looks like rate cuts are coming this year. At the moment, it's just a matter of when and how much. Today's PCE report comes out at 8:30 AM ET. Best,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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