Inflation showed further signs of cooling on Friday as Wall Street starts to price in further interest rate cuts by the Federal Reserve.
The personal consumption expenditures price index (PCE), the Fed’s preferred measure of inflation, showed that the rate at which prices rose for goods and services last month was 2.2% — below economists’ estimates of 2.3% year-over-year.
Core inflation, which strips out volatile food and energy prices, rose 2.7% — in line with expectations and slightly higher than last month’s 2.6%.
Inflation moderating towards the central bank’s 2% target gave the Fed enough room to commence its policy easing cycle with a 50 basis point rate cut last week.
Ensuring that unemployment rates do not shoot up will be its focus now.
“Even in the case of a small deviation from consensus, the recent shift in the Fed’s focus to the employment side of its mandate means markets are less sensitive to inflation news,” strategists at ING Bank said.
Data through the week points to a still-resilient economy overall, leaving traders uncertain about the Fed’s next move.
Odds of another outsized move at the central bank’s November meeting stand at 50.8%, as per the CME Group’s FedWatch Tool.
Those for a 25 bps reduction stand at 49.2%.
Stock futures inched lower early on Friday morning as investors refrained from placing big bets before the PCE numbers were published by the Commerce Department.
Dow futures were down by around 22 points, or 0.05%, while the S&P 500 E-minis were down 7 points, or 0.12% and Nasdaq 100 E-minis were down 53.75 points, or 0.26%.
Futures tied to the Russell 2000 index, which tracks small caps, were 0.2% higher.
The University of Michigan’s final September estimate on consumer sentiment and remarks from Fed Governor Michelle Bowman are also in focus on the day.
Late on Thursday, Fed Governor Lisa Cook said the central bank’s rare move earlier this month could address increased “downside risks” to employment.
Wall Street’s main indexes ended higher in the previous session, with the S&P 500 closing at its highest levels on record after an upbeat forecast from Micron invigorated optimism around artificial intelligence.
The benchmark index along with the blue-chip Dow and tech-heavy Nasdaq are on track for their third-straight week of gains.
Among other stocks, Bristol Myers Squibb surged 6% after the Food and Drug Administration approved its schizophrenia drug, providing patients with a treatment option that reduces symptoms of the mental disorder without common side effects.
Costco Wholesale dropped 1.3% after missing market expectations for fourth-quarter revenue, hurt by cautious consumer spending on pricier items at its membership-only stores and lower gasoline prices.
Dollar General slipped 2.1% after Citigroup downgraded the discount retail chain to “sell” from “neutral”.
US-listed shares of Chinese firms such as Alibaba rose 0.7%, PDD Holdings climbed 2.2% and NetEase gained 2.1% tracking domestic stocks after China’s central bank lowered interest rates and injected liquidity into the banking system, in its latest stimulus move.
Miners such as Albemarle added 2.8% and US-listed shares of BHP rose 1% after a report showed top Chinese cities Shanghai and Shenzhen are planning to lift key remaining restrictions on home purchases to attract potential buyers.
With Post Wires
