Stocks End Lower Yesterday, All Eyes On This Morning's PCE Inflation Report

Market Moves You Need to See Stocks End Lower Yesterday, All Eyes On This Morning's PCE Inflation Report [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks End Lower Yesterday, All Eyes On This Morning's PCE Inflation Report The big 3 indexes (Dow, S&P 500 and Nasdaq) closed lower yesterday. But the small-cap Russell 2000 and the mid-cap S&P 400 both closed higher. Yesterday's second estimate for Q1'24 GDP (there's 3 estimates in total), came in lower than expected at 1.3% vs. last month's (first estimate) of 1.6% and views for 1.5%. Weekly Jobless Claims rose 3,000 to 219K vs. the consensus for 217K. The 4-week moving average came in at 222.5K vs. last month's 220K. Retail Inventories rose 0.7% m/m vs. last month's downwardly revised 0.1% (from 0.3%). Wholesale Inventories rose 0.2% vs. last month's upwardly revised -0.1% (from -0.4%). Pending Home Sales fell -7.7% m/m vs. last month's 3.6% and estimates for 0.3%. The Pending Home Sales Index came in at 72.3 vs. last month's 78.3. And Corporate Profits (after tax) rose 10.9% y/y vs. last month's 8.6%. With Inventory & Consumption Adjustments, it was up 6.4% vs. last month's 3.8%. (Not that surprising given the better than expected earnings season.) Speaking of earnings, Best Buy reported before the open yesterday and posted a positive EPS surprise of 12.15%, and a negative sales surprise of -1.24%. That translated to a quarterly EPS growth rate of 4.34%, and a sales growth of -6.55%. They were up 13.42% yesterday. After the close, we heard from Costco, which reported a positive EPS surprise of 2.16%, and a positive sales surprise of 0.72%. Shares were up 1.09% in the regular session before earnings, and down -1.70% in after-hours trade. We also heard from Dell after the close, and they reported a positive EPS surprise of 1.60%, and a positive sales surprise of 2.50%. That equated to a quarterly EPS growth rate of -3.05%, and a sales growth of 6.31%. They were down -5.18% in the regular session before earnings, and dropped another -18.3% in after-hours trade. But cloud-based security provider Zscaler posted a positive EPS surprise of 35.4%, and a positive sales surprise of 3.30%. Their quarterly EPS growth rate came in at 83.3% vs. this time last year, with a sales growth rate of 32.1%. They were up roughly 17% in after-hours trade. We'll get another 61 companies on deck to report today. But what the market is really waiting for is this morning's Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge. That will show whether inflation is continuing to head back down, or if progress has stalled. The headline number is expected to be up 0.3% m/m, in line with last month's pace. On a y/y basis, it's expected to be up 2.7%, also in line with last month's pace. The core rate (ex-food & energy) is expected to come in at 0.2%, just below last month's 0.3%. On a y/y basis, it's expected to come in at 2.8%, in line with last month's 2.8% as well. That comes out at 8:30 AM ET. An as expected, or better than expected PCE report would be welcomed news. But once that's out, attention will turn to next week's Employment Situation report. Just last week, Federal Reserve Governor Christopher Waller said "in the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy." In other words, they need to see inflation coming down, and the labor market easing. Without the latter, rates could stay higher for longer, even longer than expected. 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