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Profit from the Pros By Kevin Matras Executive Vice President
Stocks Up Modestly As Traders Await PCE Inflation Report On Thursday
Stocks closed modestly higher yesterday as subdued trading continued for day 2.
But that's fine. If that's what it takes for the market to catch its breath after the impressive gains they've racked up over the last 4+ weeks, no problem. Since the correction low closes in late October, the Dow is up 9.25%, the S&P up 10.6%, and the Nasdaq is up 13.4%.
Although, the market is also probably waiting for Thursday's (11/30), Personal Consumption Expenditures (PCE) index. That's the Fed's preferred inflation gauge. And it will be the last look at inflation we?ll get before the next FOMC announcement on 12/13.
The consensus is expecting it to come in lower, just like the CPI and PPI inflation reports two weeks ago.
And most believe the Fed will stand pat on rates at their next meeting. In fact, Fed Funds traders have a 96.1% probability that they'll pause yet again.
The real question is will the Fed call it quits after that meeting and essentially take further hikes off the table? Or will they leave the door open? Will they begin talking about the size of rate cuts they see in 2024 (even though they are not likely to begin until the 2nd or 3rd quarter), or will they refuse to elaborate beyond what they've already said (which is the expectation of a -50 basis point rate cut sometime in 2024), even though many are expecting cuts of -100 basis points or more?
We'll all have to wait until 12/13.
But what Thursday's inflation report says, will help inform their outlook.
Same for next week's Employment Situation report.
In the meantime, there's plenty of other business to get thru first.
Yesterday's Case-Shiller Home Price Index rose 0.2% m/m (unadjusted) vs. last month's 0.4% pace. On a y/y basis it's up 3.9% vs. last month's 2.2%.
The Richmond Fed Manufacturing Index declined to -5 vs. last month's 3 and views for 1.
And the Consumer Confidence Index rose to 102.0 from last month's downwardly revised 99.1 (from 102.6 originally), and the consensus for 101.5.
Today we'll get the 2nd estimate for Q3 GDP (consensus is for 4.9 like the first estimate), MBA Mortgage Applications, the International Trade in Goods report, Retail and Wholesale Inventories, Corporate Profits, the Survey of Business Uncertainty, and the Beige Book report.
Q4 is typically the best quarter of the year.
With just 5 more weeks left in the year, the market looks poised to finish the year strong.
So make sure you're taking full advantage of it.
See you tomorrow,
Executive Vice President, Zacks Investment Research
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