The U.S. stock market is under some pressure early this morning, as traders prepare to wrap up a volatile week. Today, investors will be reacting to a key inflation report. The latest corporate profit releases will also probably have an impact on market sentiment. As we were writing this update, the S&P 500 Index futures were off about 30 points (-0.50%) in pre-market trading. The NASDAQ futures were showing larger losses.
In economic news, the PCE (Personal Consumption Expenditures) Price Index was just released. According to the report, prices rose 2.4% during the month of November, on a year-over-year basis. This figure was a bit better than analysts had expected. The PCE Price Index is closely watched by the Federal Reserve and, as a result, will be followed by Wall Street. It should be noted that the Federal Open Market Committee (FOMC) just concluded its December meeting. As expected, interest rates were reduced by 25 basis points, to 4.25%-4.50%. However, Chairman Powell made it clear that further rate cuts might not be as forthcoming. He seemed quite satisfied with the direction of the economy and the labor market, but cited that inflation was still elevated and of some concern.
On the corporate front, last night we received a report from Nike (NKE), a leading maker of athletic apparel. Initially, investors seemed pleased with the report and the company’s newly-installed CEO, however the stock now appears to be under pressure. In addition, we just heard from FedEx (FDX), a leader in the package delivery marketplace. The company reported mixed quarterly results, but the announcement of a major strategic divesture was applauded by investors.
The stock market rally seems to have hit a speed bump lately. Clearly, Wall Street was not too pleased with the Federal Reserve’s less-accommodative tone. In fact, traders had a fairly pronounced reaction to the news. Of note, the CBOE Volatility Index (Wall Street’s fear gauge) has spiked dramatically over the past few days, suggesting that traders have become quite skittish. For some perspective, the recent bout of selling has pushed the S&P 500 Index slightly below its 50-day moving average (located at the 5,925 mark). Looking ahead, it is not clear if the market will find support near current levels, or if a deeper pullback might be in order. In either case, market declines, while often upsetting, can be used by long-term investors to scoop up quality stocks. – Adam Rosner
At the time of this article’s writing, the author had a position in Nike.
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