PCE Deflator

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Friday, Aug. 30. The last trading day of the month and the unofficial last day of summer, at least in the US ahead of the Labor Day holiday The Bottom Line segment of today’s podcast starts at (3:44) for listeners who want to skip ahead.

State of Play

Stocks finished mostly unchanged yesterday. As we look at our board of indicators for signs of direction at 0640, a little bit of risk appetite appears to be emerging:

• Stock index futures are pointing to gains, led by tech. The Nasdaq is up 0.7% with S&P 500 futures 0.4% to the good;

• Commodities are showing signs of life as well with copper up 0.8% and WTI crude oil holding steady at $76/barrel, which is the higher end of the range it has found itself in recent weeks;

• Cryptos aren’t doing anything. Bitcoin still hanging around $59,500;

• Bonds are also unchanged. The 2-year yields 3.91% whilst the 10-year yields 3.85%. So the yield curve is moving a tiny bit away from uninverting (the gap was 4 basis points yesterday).

Today’s Known Events

Personal Consumption Expenditures, also known as the PCE Deflator, is out at 0830. This is the Fed’s preferred inflation gauge, however with the Fed all but having declared victory over inflation it’s hard to see how this still matters all that much.

It’s still worth paying attention to. You never know, we could have a spike in inflation that will put all this Fed rate cut talk on hold. Maybe not for next month’s meeting, where a 25bps cut is all but baked in, but for the more medium-term future.

Economists who were surveyed expect headline PCE of 0.2% month-over-month, slightly worse than the 0.1% recorded last month. That would push annualized headline PCE to 2.6% from 2.5%. Core PCE, which excludes food and energy, is also expected to print at 0.2% MoM, identical to last month, which would increase annualized Core PCE to 2.7% from 2.6%.

So nothing to get really excited about either way.