This morning, the attention of Wall Street is on the October personal income and spending report, which was issued by the Labor Department at 8:30 A.M. (EST). What investors were most interested in was the latest Personal Consumption Expenditures (PCE) Price Index reading, which is the most closely monitored assessment of the current U.S. inflation situation by the Federal Reserve. The report showed that the PCE Price Index on a month-to-month basis was unchanged, and the core-PCE Price Index, which excludes the more volatile food and energy components, was up 0.2%. On 12-month basis, the respective PCE Price Index and core-PCE Price Index increased 3.0% and 3.5%. Although the latter figures were still above the Fed’s target rate of 2%, the report showed a continued moderation in inflationary pressures, which has to be more music to the ears of central bank leaders. Treasury market yields moved slightly higher on the news, but not enough to slow the pre-market buying in the stock market, with the equity futures still holding a large portion of their early morning gains.
The stock market was little changed during yesterday’s session, with investors likely unwilling to make another major move ahead of the aforementioned report from the Labor Department, which also showed that personal income and spending rose at a similar rate (+0.2%) last month. In a separate release, the Labor Department reported that initial unemployment claims for the week ending November 25th totaled 218,000. Of note, continuing claims rose to 1.927 million, which was the highest reading since November, 2021 and is suggesting that the labor market is starting to weaken some.
Notwithstanding yesterday’s dull performance for equities and not including today’s showing, the month of November was a highly profitable stretch for stock owners. The Dow Jones Industrial Average, the technology heavy NASDAQ Composite, and the broader S&P 500 Index enter the final day of November sporting respective month-to-date gains of 7.2%, 11.0%, and 8.5%. A sharp retreat in Treasury market yields, including a nearly three-quarter-point pullback in the rate on the benchmark 10-year Treasury note, fueled a notable rally over the 30-day stretch that, for the most part, was rather encompassing. The continued drop in Treasury yields yesterday gave a boost to the stocks of the banks and the real estate and housing-related sectors.
Since the close of trading yesterday afternoon, we did receive some noteworthy quarterly results from Corporate America. The headline report came from Dow-30 component Salesforce (CRM), which beat consensus earnings-per-share forecasts, on in-line revenue results. The investment community also cheered the business software company’s upbeat fourth-quarter prognostications, and the stock is up nicely in pre-market action.
The Dow component was not the only technology company to report positive results, as CrowdStrike (CRWD) delivered revenue and earnings figures that topped the Wall Street consensus. The cybersecurity company also issued a positive outlook, and its stock is moving modestly higher in response. In the retailing space, PVH (PVH), an apparel company that owns the Tommy Hilfiger and Calvin Klein brands, also beat expectations and issued a rosier outlook for the final quarter of fiscal 2023, which ends in late January. However, the stock, which rallied nicely into the release, is looking at a lower opening today in what can be termed a case of buy the rumor, sell the news.
In separate news, OPEC+, which includes the Organization of Petroleum Exporting Countries (OPEC) and related petroleum producers, is discussing additional output cuts of about 1 million barrels a day in global oil production, as it seeks to shore up flagging crude prices. This bears watching as it could put additional upward pressure on the headline inflation figures, as a large portion of the world enters the primary winter heating season. The price of oil both here and abroad rose this morning on these reports. From an investment perspective, this could prove to be a near-term tailwind for the stocks of the oil and gas companies. - William G. Ferguson
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
CLICK HERE for more information on our services or call 1-800-VALUELINE (1-800-825-8354). Our account managers are available Monday through Friday, 8:00 AM to 6:00 PM Eastern Time.
