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PCE Deflator, Earnings
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-8:48

PCE Deflator, Earnings

Stock index futures are quiet ahead of the latest data on the Fed’s preferred inflation gauge…
Transcript

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Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Thursday, Nov. 30. The Bottom Line segment of today’s podcast starts at (4:41) for listeners who want to skip ahead.

State of Play

Stocks treaded water again yesterday, finishing roughly flat after an early rally fizzled out. After the close Salesforce (CRM 0.00%↑) and Snowflake (SNOW 0.00%↑) reported earnings that beat analyst estimates and those stocks are up overnight. As we look at our board of indicators at 0640, a tiny bit of broader risk-on appears to be emerging ahead of the latest inflation data at 0830:

  • Stock index futures are pointing to a higher open led by large caps, with Dow Industrials up 0.5% and other indexes up a little less;

  • Commodities are gaining a bit, with WTI crude oil up 1% to trade around $78.70/barrel. Copper is flat;

  • Bonds are unchanged. The 2-year yield is 4.66%. The 10-year yields 4.30%.

Known Events

Personal Consumption Expenditures, aka the PCE Deflator, is out at 0830. Economists expect the headline figure to have advanced just 0.1% month-over-month after a 0.4% increase last month, which would drop the annualized headline PCE to 3.1% from 3.4%.

The more closely-watched Core PCE is expected to increase 0.2% MoM after 0.3% at the last reading, to drop the year-over-year figure to 3.5% from 3.7%.

Seeing how it’s Thursday we also have initial jobless claims at 0830, though those are sure to be overshadowed by the PCE Deflator. Economists expect 218,000 new claims, an increase from the 209,000 seen last week, but below the four-week average of 220,000.

There are some earnings as well, making this a very busy morning indeed. Before the open, Kroger (KR 0.00%↑), Big Lots (BIG 0.00%↑), Build-A-Bear Workshop (BBW 0.00%↑), and Express (EXPR 0.00%↑) are due to report earnings. After the close we’ll hear from Marvell Technology (MRVL 0.00%↑), ULTA Beauty (ULTA 0.00%↑), UiPath (PATH 0.00%↑), and Dell (DELL 0.00%↑), among others.

The Bottom Line©️

The PCE Deflator can be expected to drive things today even if earnings seem to be the main (only) catalyst to be moving stocks this week. Friendly reminder that inflation data often prints very close to where economists had pegged it. The market is wise to this and will move based on however many percentage points the actual PCE misses by. Again the Core figure is the more closely watched of the two and the number you’re looking for there is 0.2% MoM and 3.5% YoY.

Inflation running at 3.5% annually is still more than the Fed’s 2% target, but it is vastly improved over the figures we were getting last year. So it makes sense for Fed officials to have scaled back their more hawkish rhetoric. The latest noise we got from Fed speakers this week only reinforced this trend and bonds have rallied as a result. Whether and when stocks rally is the open question. Over the last year or two these have moved pretty closely in lockstep. It doesn’t really make sense to expect this to change quite yet.

This topic was the main subject for the most recent guest podcast with Jared Dillian of Daily Dirt Nap that was recorded yesterday. It will be made available to you (and you only) later today.

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The daily podcast discusses the major market activity and economic data release schedule for the day ahead, with a contrarian bent. Also includes regular podcast episodes a day (or more) early and without ads or announcements.