Trending
US equity futures are pointing to a lower open as Wall Street gets ready for the latest reading for one of the Fed’s favored inflation metrics.
When the January Personal Income & Spending report is published at 8:30 AM, market watchers will be more interested in the core PCE Price Index reading for the month and how it compares to the 2.9% reading for December. Setting the stage for this metric, the preponderance of January inflation data that has come in ahead of market forecasts suggests the Fed’s concern over the progress on inflation stalling was a valid one. That recent string of data suggests we could see little movement in the January core-PCE figure. A higher-than-expected result could throw some cold water on the year-to-date market rally.
However, in our view, it will be tomorrow’s February Manufacturing PMI and next week’s February Services PMI that will provide greater insights on inflation compared to another piece of January data. That same February data will also reveal the pace of the economy as we enter the last month of the March quarter. Our thinking is that so long as that data confirms an economy growing above trend, it will give the market reason to shrug off sticky inflation data points and provide the rationale for another push on expectations for the start of the Fed’s next rate-cutting cycle.