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US stocks diverged Wednesday as investors digested fresh data that showed inflation made little progress toward the Fed’s 2% target in October.
After clinching record highs on Tuesday, the S&P 500 (^GSPC) fell about 0.2%, while the Dow Jones Industrial Average (^DJI) rose around 0.3%. The tech-heavy Nasdaq Composite (^IXIC) was down about 0.7%.
The mood is muted in the wind-down to the Thanksgiving holiday, which will see markets shut on Thursday and close early on Friday. But the Fed is taking the fore again after being eclipsed somewhat by the debate over the impact of President-elect Donald Trump’s tariff plans and Cabinet choices.
The latest reading of the Federal Reserve’s preferred inflation gauge showed price increases were flat in October from the prior month, raising questions over whether progress in getting to the central bank’s 2% goal has stalled.
The core Personal Consumption Expenditures (PCE) index, which strips out food and energy costs and is closely watched by the central bank, rose 0.3% from the prior month during October, in line with Wall Street’s expectations for 0.3% and the reading from September. Over the prior year, core prices rose 2.8%, in line with Wall Street’s expectations but above the 2.7% seen in September.
Traders currently see a roughly 34% chance the Fed holds rates steady at that meeting, up from about 24% a month before, per the CME FedWatch Tool.
Also out Wednesday, the second estimate of third quarter GDP was unchanged, showing the US economy grew at an annualized rate of 2.8% in the period. Meanwhile, weekly jobless claims continued to move lower with 213,000 unemployment claims filed in the week ending Nov. 23, down from 215,000 the week prior.
Trump on Tuesday tapped Jamieson Greer — a veteran of his first term — as US trade representative. Given Greer was heavily involved in Trump’s original China tariffs, Wall Street is assessing what his role could mean for the big new tariffs promised for the US’s top trading partners.
On the corporate front, Dell (DELL) shares sank over 10% after quarterly revenue fell short amid flagging PC demand. Peer HP’s (HPQ) stock also fell post-earnings, also down over 10%.
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Key inflation gauge shows price increases stayed flat from prior month
The latest reading of the Federal Reserve’s preferred inflation gauge showed price increases were flat in October from the prior month, raising questions over whether progress in getting to the central bank’s 2% goal has stalled.
The core Personal Consumption Expenditures (PCE) index, which strips out food and energy costs and is closely watched by the central bank, rose 0.3% from the prior month during October, in line with Wall Street’s expectations for 0.3% and the reading from September.
Over the prior year, core prices rose 2.8%, in line with Wall Street’s expectations and above the 2.7% seen in September. On a yearly basis, overall PCE increased 2.3%, a pickup from the 2.1% seen in September.
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JPMorgan issues S&P target of 6,500 for 2025 as ‘US exceptionalism’ rolls on
Another Wall Street strategist sees a solid backdrop for the US economy and a broadening corporate earnings picture driving stocks higher in the year ahead.
JPMorgan’s global equity strategy team led by Dubravko Lakos-Bujas sees the S&P 500 (^GSPC) hitting 6,500 by the end of 2025, joining the likes of Goldman Sachs and Morgan Stanley, who issued the same target. The target represents about an 8% increase from current levels.
Lakos-Bujas wrote that continued “US exceptionalism,” continued earnings growth, and interest rate cuts from the Federal Reserve will be a tailwind for stocks in the year ahead. He argued the US is likely to remain the “global growth engine with the business cycle in expansion, healthy labor market, broadening of AI-related capital spending, and prospect of robust capital market and deal activity.”
He added, “heightened geopolitical uncertainty and the evolving policy agenda are introducing unusual complexity to the outlook, but opportunities are likely to outweigh risks. The benefit of deregulation and a more business-friendly environment are likely underestimated along with potential for unlocking productivity gains and capital deployment.”
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Stocks waver ahead of inflation print
US stocks paused near record highs on Wednesday as investors waited for a reading on the Federal Reserve’s favorite inflation gauge to provide clues to the path of interest rates.
After clinching record highs on Tuesday, the S&P 500 (^GSPC) fell about 0.2% at the open while the Dow Jones Industrial Average (^DJI) rose 0.1%. The tech-heavy Nasdaq Composite (^IXIC) was down about 0.3%.
The October print of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, is due for release on Wednesday morning at 10 a.m. ET. The focus is on whether inflation has stalled.
Economists expect annual “core” PCE — which excludes food and energy — to have clocked in at 2.8% in October, up from the 2.7% seen in September.
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Weekly jobless claims fall, GDP steady
Weekly jobless claims rose less than expected last week, and hit a seven-month low, as the impact of labor strikes and severe weather continued to abate.
New data from the Department of Labor showed 213,000 initial jobless claims were filed in the week ending Nov. 23, down from the 215,000 the week prior and below the 215,000 economists had expected.
Meanwhile, the number of continuing applications for unemployment benefits hit 1.9 million, up 9,000 from the week prior and the highest level since November 2021.
Elsewhere in economic data, the second estimate of third quarter GDP came in unchanged, once again showing the US economy grew at annualized rate of 2.8%.
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Good morning. Here’s what’s happening today.
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About those potential Trump tariffs
Shares of automakers General Motors (GM) and Ford (F) were throttled on Tuesday following Trump’s tariff threats toward China, Mexico, and Canada.
GM lost 9%, while Ford dropped 3% as both companies have a strong presence in Mexico.
But automakers aren’t the only companies that stand to be hurt by tariffs, of course.
Think computers and T-shirts!
Here’s what HP Inc. (HPQ) CEO Enrique Lores and Abercrombie & Fitch (ANF) CEO Fran Horowitz told me on the tariff topic.
Enrique Lores
“Some of that [cost of potential tariffs] will have to go to consumers given what is the overall margin that we have in the categories. But again, we need to wait and see what the final tariffs are for us to define what the exact plan is going to be.”
Fran Horowitz
“When we understand truly what’s happening, we will have to make some adjustments, and we will adjust accordingly,It’s exactly what we did in 2018 when we had the same challenge. In 2024 we will not be receiving more than 5% or 6% of our US receipts from China. We’re taking a look at it country by country, but the agility that we’ve built into our supply chain is really what’s going to help us manage through this.”
