The Federal Reserve’s preferred measure of inflation posted the smallest back-to-back increase since late 2020 as the data largely met expectations. The markets ignored the “super core” PCE report, the gauge that tracks services inflation excluding housing and energy, jumped by the largest amount since the start of the year. Several months ago, the “super core” posted a smaller than expected advance and the market’s celebrated.
Depending upon what index is used, the PCE rose between 3.3% and 4.2% year over year, considerably higher than the 2.0% mandated speed limit.
Generally speaking, inflation has declined but is remaining stubbornly elevated in the face of the most aggressive Federal Reserve in history that has increased the overnight rate from 0.00% to 5.5% in 17 months, an increase that is logarithmic.
Markets were mixed on the data, perhaps waiting for today’s unemployment report which was released at 8:30 today.
Non-farm and private sector payrolls rose more than expected. The unemployment rate also increased to 3.8% versus the expected rate of 3.5% as the labor participation rate (LPR) increased to 62.8% versus the expected rate of 62.6%. Wage growth slowed nominally; the data point the market is focusing upon.
Stock futures rose and bond yields fell on the data as it fueled speculation the Fed is finished raising interest rates.
Last night the foreign markets were up. London was up 0.62%, Paris up 0.17% and Frankfurt down 0.08%. China was up 0.43%, Japan up 0.28% and Hang Seng closed for a holiday. Dow and NASDAQ futures are up 035% and 0.15%, respectively. The 10-year is up 9/32 to yield 4.07%.
Kent Engelke
Chief Economic Strategist Managing Director
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.
