pebblewriter

Tag: PCE

  • Stagflationary Data…Again

    Futures are off sharply on a very stagflationary offering of economic data. Q1 GDP rose at only 1.6% versus expectations of 2.4%, while core PCE prices rose 3.7% against expectations of 3.4%. The PCE index itself is due out tomorrow.

    Meanwhile, the Labor Department reported that unemployment claims for the week ended April 20 came in at 207,000 versus 215,000 expected and the 212,000-222,000 which have been reported in the past 6 weeks.

    Weaker than expected economic data, combined with stronger than expected inflation and employment, places the FOMC in a difficult position and a market which has been counting on lower interest rates downright bearish.

    Despite a strong showing in March, the SPX is right back where it was the last time we wrote about stagflation in February [see: Stagflation Fears Renewed.]

    About the only silver lining in our charts is the 10Y, which has reached our 4.738 target several weeks earlier than expected. The resistance at this level could make a difference for stocks.

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  • Charts I’m Watching: Apr 22, 2024

    Futures have regained about 30 points after last week’s drubbing.

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  • PCE in Line

    January headline PCE registered a 0.3% increase MoM (0.4% Core) which was in line with most estimates. YoY, headline PCE rose 2.4% versus 2.6% in December, while core PCE rose 2.8%, down from 2.9% in December.

    In other economic data, personal income rose to 1.0% MoM from 0.3% in December and personal spending rose at a 0.2% rate versus 0.7% in December.

    Algos cheered the data, with futures swinging from a moderate loss to a moderate gain in seconds.

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  • PCE in Line, Home Sales Beat

    PCE increased 0.2% MoM and 2.6% YoY in December, in line with most estimates. Core PCE increased 2.9% YoY.  This is the smallest gain since Mar 2021. Drilling down, goods rose 1.1% (durable goods 1.5%) in December while services rose 0.3%.

    Real PCE rose 3.2% YoY, with the goods category growing 5% and durable goods rising 8.5%.

    At 0.7% MoM, personal spending rose substantially more than the 0.4% estimates (and prior.) Spending rose 4.2% YoY, a slight decrease from November’s 4.4%.

    December pending home sales far outpaced estimates at +8.3% versus 2.0% and -0.3% prior. The annual increase was much less frothy at 1.3%. The monthly beat was paced by 11.9% and 14.0% gains in the South and West respectively. Sales dropped 3.0% in the Northeast.

    Futures are off slightly after rebounding from their overnight lows.
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  • Q4 GDP Beats

    Q4 advanced GDP came in at 3.3% annualized versus 2.0% estimates and full year 2023’s 2.5%. The PCE price index and durable goods orders came in as expected, though durable goods ex-transportation came in sharply higher than estimates.  The numbers…

    Futures had already bounced at the rising white channel midline, but extended their gains after the data dump. The more important chart to watch, however, remains SPX itself.

    New home sales are due out at 10 ET.

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  • PCE Gives Fed Room to Cut

    PCE came in below expectations. Headline was -0.1% MoM and 2.6% YoY. Core was +0.1% and 3.2% YoY.  This was the smallest rise since April 21, and offers the Fed additional room to consider cuts in 2024 should the trend continue.Futures added to modest gains after the print.  The key issue remains: whether the moderating inflation trend can continue unabated.

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  • PCE On the Rise

    After falling for months, YoY PCE ticked higher in July: 3.3% versus 3.0% in June. Excluding food and energy, the print was 4.2% versus 4.1% in June.The data pared some of the overnight ramp, with futures easing lower as we approach the opening bell.

    In other economic news, personal spending (0.8% MoM) rose faster than expected while income (0.2% MoM) grew slower than expected – not an optimal combination when trying to avoid a recession.

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  • Some Like It Hot

    If you’re a retailer, you might be thrilled with the personal income and personal spending beat last month (0.4% vs 0.3% exp and 0.8% versus 0.4% expected.) If you’re a manufacturer, you might be pleased with durable goods coming in at a +1.1% versus the -1.3% expected.

    But, if you’re a member of the FOMC, you have to be chagrined that those hot numbers, combined with hotter core and headline PCE and tightening credit conditions, will force tighter monetary conditions.  The algos agreed for a few minutes, but were quickly reminded of the requirement to take their cues from VIX.

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  • Mixed Messages

    Futures bounced off our 50-day MA target and are up sharply on NVDA‘s blowout earnings/forecast, egged on by Speaker McCarthy’s latest promise that a debt ceiling resolution is on the way.

    Of course, this bullishness is unwarranted from a Fed rate hike perspective. Initial claims came in below expectations and Q2 GDP (the deflator was 4.2% vs 4.0 expected) was hotter than expected. Not exactly a scenario that supports a pause/drop.

    Unless VIX plunges below 18.58, this ramp job should be faded.

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  • Debt Ceiling Worries

    We’re starting to see cracks in the equities and bond markets related to the debt ceiling. Interest rates are ratcheting higher. And, although OPEX-related maneuvers are working to prop up stocks, we had a momentary breakdown in SPX yesterday.

    Utilities, a bond proxy for some, have taken a big hit this week as investors shift into shorter-term, less volatile treasuries.

    Which would you rather own, XLU with a beta of .56 and yield of 3.01% or a 6-mo Tsy paying 5.25%?

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