This morning, the attention of Wall Street will be on the Federal Reserve and its continuing battle to tame inflation. That is because at 8:30 A.M. (EST), we received the latest report on personal income and expenditures. Within that release, investors were primarily focused on the Personal Consumption Expenditures (PCE) Price Index, which is the assessment of inflation most closely followed by the Federal Reserve. This report, which showed that personal income increased a whopping 1.0% in January, while personal spending rose 0.2%, was expected to be given more consideration after both consumer and produce (wholesale) prices came in hotter-than-expected last month.
The report showed that the PCE and core PCE Price Indexes, the latter of which excludes the more-volatile food and energy components, both were up on a month-to-month basis in January, climbing 0.3% and 0.4%, respectively. On a 12-month basis, the data were more encouraging, with the respective PCE and core PCE Price Indexes increasing 2.4% and 2.8%. Both those figures were down from the December readings. The yields in the Treasury market fell on the inflation data, and not surprisingly the equity futures, which were lower across the board heading into the PCE data, reversed course and are now pointing to a modestly higher start to the trading day stateside.
We also learned this morning that initial unemployment claims for the week ending February 24th totaled 215,000. This figure was up from the previous-week’s revised tally. Continuing claims topped the 1.9 million mark last week. Later this morning, we will get data on January pending home sales and commentary from three regional Federal Reserve Presidents, including long-time Cleveland Federal Reserve President Loretta Mester, who historically takes a hawkish view on monetary policy.
The major equity averages had traded in a rather tight band in the days leading up to today’s personal income and spending report. Yesterday, the selling was quite contained. In general, equities have been helped by results from fourth-quarter earnings season, which have exceeded Wall Street’s expectations. This backdrop has provided support for stocks, despite the still restrictive monetary policies in place, and has the market on pace for its four-consecutive winning month. That said, after the most recent move higher on last week’s results from semiconductor giant NVIDIA (NVDA), which pushed the NASDAQ Composite into rarefied air, we have seen some selective profit-taking this week and some rotation out of the higher-growth sectors and into the value names.
The fourth-quarter earnings season is nearing a conclusion, but before the books are closed we will receive some more quarterly reports from the retailers in the coming days. Since the close of trading yesterday, the headline report came from Dow-30 member Salesforce, Inc. (CRM). The company reported revenue and earnings per share that exceeded forecast, but the stock of the software provider is relatively unchanged on weak sales guidance. Shares of Snowflake (SNOW) are also feeling the angst of investors after that data warehouse-as-a-service provider beat forecasts, but issued softer-than-expected prognostications. Conversely, shares of Okta (OKTA) are looking at a sharply higher opening after the cyber-security company posted strong results and issued positive guidance. Likewise, the stock of Pure Storage (PSTG) is up in pre-market action, on the potential positive impact of the burgeoning artificial intelligence space on the company’s business model.
Today, the news from Corporate America has been underwhelming, led by mixed results from Anheuser-Busch InBev (BUD). The alcoholic beverage maker’s quarterly revenue increased 6.2%, to $14.47 billion, slightly below the consensus forecast of $15.66 billion, as higher prices were offset by performance in the United States, where sales fell nearly 17% during the three-month period. Full-year revenue rose 7.8%, to $59.38 billion, short of the $60.52 billion consensus forecast. Meantime, shares of Paramount Global (PARA), which have been under pressure for an extended stretch, are pointing to a modestly higher opening after the entertainment company posted a surprise profit, with video streaming gains helping to offset a weak advertising market and slowing results in its legacy businesses. – William G. Ferguson
At the time of this article’s writing, the author held positions in none of the companies mentioned.
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