Stocks rise as key Fed-watched inflation data keeps cooling
June 28, 2024
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US stocks rose on Friday as the latest reading from a closely watched inflation gauge extended a story of cooling inflation and as investors absorbed the fallout of the Biden-Trump debate.
The S&P 500 (^GSPC) advanced roughly 0.1% after the benchmark closed a step nearer to its record high. The tech-heavy Nasdaq Composite (^IXIC) rose 0.3%, while the Dow Jones Industrial Average (^DJI lost about 0.1%
The gauges are eyeing an upbeat end to a bumpy week that saw the S&P 500 and the Nasdaq come back from a three-day losing streak. While stocks are set to book a stellar first half as they wrap the last trading day of June, those wobbles have fanned fears of a pullback for the rest of the year.
The last significant data point of the first six months of the year came in the form of the the Fed’s preferred inflation gauge. Yahoo Finance’s Josh Schafer reported inflation eased in May as prices increased at their slowest pace since March 2021.
The core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Fed, rose 0.1 % in May from the prior month, in line with Wall Street’s expectations.
Meanwhile, with November’s US election high on the list of risks, investors took note of President Joe Biden’s weak showing in his first debate against presumptive Republican nominee Donald Trump. The former president’s promised tax cuts and trade clampdown are seen as likely to boost stocks. Shares in Trump Media & Technology Group (DJT) jumped in morning trading.
The market is also on alert for more signs that consumer resilience is losing steam, as key companies flag downbeat prospects for sales. Nike (NKE) stock sank more than 15% in early trading, while Walgreens (WBA) shares remained under pressure on the heels of Thursday’s 22% tumble.
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Stocks rise as the Fed’s preferred inflation metric shows further cooling
US stocks rose on Friday as the latest reading from the Fed’s preferred inflation gauge showed inflation continues to cool, raising the likelihood of a rate cut in the months to come.
The S&P 500 (^GSPC) advanced roughly 0.1% after the benchmark closed a step nearer to its record high. The tech-heavy Nasdaq Composite (^IXIC) rose 0.3%, while the Dow Jones Industrial Average (^DJI about 0.1%
Fed’s preferred inflation gauge shows prices rose at slowest pace since March 2021
The latest reading of the Fed’s preferred inflation gauge showed inflation eased in May as prices increased at their slowest pace since March 2021.
The core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Federal Reserve, rose 0.1 % in May from the prior month, in line with Wall Street’s expectations and slower than the 0.3% increase seen in April.
Core PCE was up 2.6% over the prior year in May, in line with estimates and unchanged from the annual increase seen in the last two months. May’s reading marked the slowest annual gain in more than three years.
Trump Media on the move
After a shaky debate performance by President Joe Biden, shares of Trump Media & Technology (DJT) are on the move.
As of this writing, shares are up 7.5% in pre-market trading.
Equally as bad to watch (sort of … ) as last night’s debate is Nike’s (NKE) stock in the pre-market, down 14% as of this writing.
The company’s guidance was a real letdown, and concerns linger about its management’s execution around product innovation. To not see better guidance from Nike in an Olympic year is a red flag.
I liked Stifel analyst Jim Duffy’s take on the quarter:
“The FY25 guide (the 5th downward consensus revision in 6 quarters), pushes prospects for growth inflection further into 2025 (perhaps FY4Q or spring 2025 at the earliest) asking investors to both underwrite success of not yet proven styles and look across an uncertain consumer discretionary backdrop into 2HCY24 until momentum could build again into 2HCY25. Management credibility is severely challenged and potential for C-level regime change adds further uncertainty. An investor day in Nov. will likely outline a multi-year economic model with lower returns than the precedent adding risk to the premium enjoyed in the historical multiple. We remain appreciative of N scale advantage in a category with secular growth tailwinds and structural margin potential but, at the current valuation, can’t support a compelling upside case until growth inflection becomes more tangible.”
Duffy downgraded his rating on Nike to hold this morning.
