The Federal Reserve’s preferred measure of underlying inflation rose at the slowest monthly pace since late 2020, helping to lay the groundwork for policymakers to forgo an interest rate hike at their next meeting.
The core personal consumption expenditures price index (PCE), which strips food and energy, climbed 0.1% in August. Year over year the core PCE is up 3.9%, a deacceleration from last month’s 4.2% rate. It is, however, almost twice the 2.0% speed limit mandated by the Fed.
The data was the catalyst for a nominal rally in Treasuries which permitted a morning advance in equities. Technology led the gains.
Shares reversed their gains on the specter of a government shutdown, the auto strike which will add to cost push inflation, and accepting the notion that rates will be higher for longer than most had anticipated.
The fourth quarter commences today. Historically it is a strong period for equities, perhaps reversing the losses of the third quarter, which is typically the weakest.
Earnings season commences next week. According to Bloomberg, earning warnings are negligible. Is this the result of both companies and analysts alike having dumbed down expectations as to not to over promise and underdeliver?
The economic calendar contains several top tier indicators that could increase volatility given the Fed’s dogmatic statements that monetary policy will be entirely based upon the data. Statistics release include the ISM Manufacturing and Services Surveys, JOLTS Job Opening, ADP Employment Survey, several manufacturing statistics, the trade gap and the BLS Labor report.
It should be noted Friday’s labor report may be delayed if the government does shut down.
Last night the foreign markets were down. London was down 0.34%, Paris down 0.23% and Frankfurt down 0.17%. China was up 0.01%, Japan down 0.31% and Hang Seng up 2.51%. Futures are nominally higher ahead of Federal Reserve roundtable that includes Fed Chairman Powell. A government shutdown was avoided with an eleventh-hour deal. The 10-year is off 12/32 to yield 4.63%.
