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US indices ended the day lower despite market excitement over the latest PCE data.
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Both general and core personal consumption expenditures were at 2.6% annualized.
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The stock market finished the first half of 2024 strong, with the S&P 500 up nearly 15%.
US indices fell on Friday after temporarily hitting new records as investors celebrated the latest inflation report.
The personal consumption expenditures index, the Federal Reserve’s preferred gauge of inflation, hit a three-year low. Both core and headline PCE fell to an annualized 2.6% in May, just below the previous month’s reading.
Personal spending also rose month-on-month, with spending on real goods recovering after a weak April.
“The soft inflation data will provide evidence that the Fed can start cutting rates in the coming months,” said Jeffrey Roach, chief economist at LPL Financial. “As long as incomes grow in a healthy way, consumers will continue to spend. The key is the labor market, so we must now turn our attention to next week’s non-farm payroll for a fresh look at the labor market.”
Although this did not change expectations for monetary policy in May, investors remain convinced of interest rate cuts this year. Right now, futures markets are pricing in the odds of two
The soft inflation numbers weren’t enough to keep the indexes in the green through Friday, but the stock market still ended the first half of 2024 strong. On an annualized basis, the S&P 500 gained 14.1%, outpacing the Nasdaq’s 16.6% gain.
“But there are still pockets of relative weakness,” wrote David Morrison, senior market analyst at Trade Nation. “The old-school Dow Jones managed to gain just 4%, while the Russell gained a paltry 1%. Could these be harbingers of weakness to come, or will they take over as market leaders in the second half?”
One of the issues now is a worrying split in the market, with only a handful of stocks actually leading index gains. At the same time, interest rates remain high, signaling a slowing economy, while Nvidia’s $430 billion blip this week added concerns to the long-term prospects of an AI-led bull run.
This was the position of the American indexes at the closing bell on Friday at 4 p.m.:
Here’s what else is happening today:
In commodities, bonds and crypto:
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West Texas Intermediate crude fell 0.53% to $81.3 a barrel. Brent crude, the international benchmark, fell 0.18% to $84.77 a barrel.
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Gold fell 0.12% to $2,326 an ounce.
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The yield on 10-year government bonds rose by 6 basis points to 4.349%.
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Bitcoin was essentially flat at $60,809.21.
Read the original article on Business Insider
