US data bodes well for stocks
Is there anything that can disrupt the stock market rally in the US? A solid 2.8% print for Q3 GDP, strong corporate earnings, the prospect of deregulation and a steady path towards lower interest rates, all reinforce US exceptionalism as we move towards the end of 2024.
The PCE report for October came in line with expectations, the annual headline rate was 2.3%, up from 2.1% in September, but this increase had been expected by the market. The core rate was 2.8%, up from 2.7%, but this was also in line with expectations. The monthly core rate for PCE was 0.3%. Although this is a little hot, it is not outside the most recent range for monthly increases.
US traders can pack up for the Thanksgiving holiday with little to fear at this stage. The core PCE report was driven by service sector price increases, which rose at a 2.75% annual rate, while durable goods prices fell last month. Overall, the Fed’s preferred measure of inflation suggests that the Fed is right to tread a careful path when it comes to rate cuts, but it continues to support a gradual easing in Fed policy.
The market impact
There is now a 66% chance of a rate cut from the Fed next month, according to the Fed Funds Futures market, up from a 63% chance on Tuesday. The dollar has backed away from intra day lows, but it is still the weakest performer in the G10 FX space on Wednesday. US bond yields are down a touch across the curve. US stocks are down so far on Wednesday. The S&P 500 is lower by 0.18%, the Nasdaq is down by 0.8%. Both indices have had a strong November and are higher by 3.48% and 2.7% respectively, month-to-date.
There were some surprises in the personal income data, which rose at double the pace in October compared to September. The 0.6% growth rate also bodes well for stocks. Real income growth has been trending higher in recent months, which is good news for consumption, and thus stock market returns.
As the focus shifts to the US retail sector and the strength of the US consumer, it could be a very good Black Friday, which is already expected to be record-breaking. A better-than-expected performance could see further stock market gains. As we move into the final weeks of the year, a strong Black Friday may boost the wider stock market, which has started to outperform the US tech giants, as you can see below.
Chart 1: The Russel 2000, The Nasdaq 100 and the S&P 500, normalized to show how they move together. In recent weeks, the Russell has outperformed the other two blue chip indices, in a sign that the US stock market rally is broadening out.
Source: XTB and Bloomberg
The material on this page does not constitute financial advice and does not take into account your level of understanding, investment objectives, financial situation or any other specific needs. All information provided, including opinions, market research, mathematical results and technical analyzes published on the Website or transmitted To you by other means, it is provided for information purposes only and should in no way be construed as an offer or solicitation for a transaction in any financial instrument, nor should the information provided be construed as advice of a legal or financial nature on which any investment decisions you make should be based exclusively To your level of understanding, investment objectives, financial situation, or other specific needs, any decision to act on the information published on the Website or sent to you by other means is entirely at your own risk if you In doubt or unsure about your understanding of a particular product, instrument, service or transaction, you should seek professional or legal advice before trading. Investing in CFDs carries a high level of risk, as they are leveraged products and have small movements Often the market can result in much larger movements in the value of your investment, and this can work against you or in your favor. Please ensure you fully understand the risks involved, taking into account investments objectives and level of experience, before trading and, if necessary, seek independent advice.
