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Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research

Stocks End Higher Ahead Of This Morning?s PCE Inflation Report

Stocks closed higher yesterday, and with one more day to go, are on pace to close higher for the week.

A better than expected Q4 GDP report yesterday, which showed growth at 2.9% vs. the consensus for 2.7%, helped lift stocks.

Same goes for a better than expected Durable Goods Orders report which was up 5.6% m/m vs. last month's -1.7% and views for 2.8%. Ex-transportation it was down -0.1% vs. views for -0.2%, while core capital goods came in at -0.2% as expected.

Weekly Jobless Claims fell even further, dropping -6,000 to 186,000 vs. estimates for 202,000.

Retail Inventories were up 0.5% m/m, while Wholesale Inventories were up 0.1% vs. views for 0.5%.

And New Home Sales increased to 616,000 units (annualized) vs. last month's 602K, and the consensus for 614K.

But the report everybody is really waiting for is this morning's Personal Consumption Expenditures (PCE) report, which is the Fed's preferred inflation gauge. After better than expected inflation reports via the CPI and PPI reports over the last two weeks, investors are hoping to see the same easing of inflation with this morning's PCE report.

We'll also get the Pending Homes Sales Index, and Consumer Sentiment.

But the PCE report is the main event.

Additionally, we'll also get more earnings, with 72 companies on deck to report today, including Chevron, American Express, and HCA Healthcare, to name a few.
Next week, earnings season ramps up with as many 548 companies set to report. And another 706 the week after that.

The market, next week, will also be watching what the Fed does on rates.

They will announce their rate decision on Wednesday, February 1. The market is widely expecting a 25 basis point hike, which would put the midpoint for the Fed Funds rate at 4.63%. That would leave only 2 more hikes of 25 basis points to get to their projected terminal rate of roughly 5.10%.

But there's been plenty of speculation lately that the Fed might call it quits at 4.75% ? 5.00%. So traders will be listening for any clues as to whether the Fed expects to lower that target, maintain it, or raise it.

In the meantime, all eyes will be on this morning's PCE report.

And then earnings.


Kevin Matras

Executive Vice President, Zacks Investment Research


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