4:12pm: Nasdaq, Dow clinch four-session winning streaks
The Dow closed Thursday down 168 points, 0.5%, at 34,722, the Nasdaq Composite added 16 points, 0.1%, to 14,035 and the S&P 500 shed 7 points, 0.2%, to 4,508. The small-cap Russell 2000 index was flat at 1,903.
The Nasdaq Composite notched its fourth-straight winning session but that wasn’t enough to prevent August from becoming the index’s worst month of 2023.
“At the end of the day, equities are following bonds, so a continued decline in US Treasury yields is the keystone in the bridge for more upside in stocks, at least in the near term,” said Joseph Cusick, senior vice president at Calamos Investments. “Absent a surprise result from the August U.S. nonfarm payrolls report on Friday, holiday-induced liquidity conditions are beginning to set in ahead of Labor Day.”
One bright spot was Salesforce, shares of which gained 3% following strong quarterly results.
12:00pm: US stocks steady and in the green
US stocks remain in positive territory on course for a fifth straight day of gains following the in line inflation data.
At midday, the Dow Jones Industrial Average was up 0.1% at 34,926.05, the S&P 500 was 0.2% higher at 4,522.59 and the Nasdaq Composite was up 0.4% at 14,072.64.
Chris Beauchamp, chief market analyst at IG said: “While today’s PCE data wasn’t lower than expected, the in-line readings were enough to put stocks on the front foot as the end of August loomed.”
“While rate cuts are clearly off the table, the prospect of getting to the end of the year without any more US hikes has spurred fresh buying in equities.”
“Falling yields have added to the attraction of equities, which are ending the month in much better form than was the case a week ago,” he added.
9:45am: Wall Street extends winning streak
US stocks opened higher, looking to extend their winning streak to five days, as in line inflation figures boosted hopes that the Federal Reserve will hit the pause button on interest rates.
Shortly after the opening bell, the Dow Jones Industrial Average was up 0.4% at 35,011.87, the S&P 500 was up 0.1% at 4,520.58 and the Nsdaq Composite was up 0.2% at 14,048.12.
Personal consumption expenditures data came in bang in line with Street expectations in a further sign that the central bank’s actions to tackle inflation are bearing fruit.
Paul Ashworth at Capital Economics noted “unfavourable base effects pushed core PCE inflation back up to 4.2%, from 4.1%, but the three-month annualised rate slowed to a two-and-a-half year low of 2.8%, from 3.3% the month before.”
“That’s still above the 2% target but, factoring in the coming slowdown in housing inflation, a return to target by mid-2024 is now well within reach,” he thinks.
Ian Shepherdon at Pantheon Macroeconomics felt the “bigger picture here is that it is becoming harder to dismiss the improvement in the inflation numbers as mere noise.”
“The core PCE deflator rose at a 3.3% annualised rate in the three months to July, compared to the previous three months, the lowest on this basis since March 2021.”
“Our base case is that the year-over-year increase in the core PCE will fall to around 3% by the end of the year, setting the stage for rate cuts starting next spring,” he said.
In company, Dollar General Corp slumped 15.5% after lowering guidance as results missed forecasts.
The discount retailer cited increased shrinkage, or theft, as a factor behind the earnings disappointment, a theme which has been prevalent in the retail earnings season.
Salesforce jumped 5.4% after it raised guidance and results after the closing bell Wednesday were well received.
8:47am: Futures extend gains after in line Inflation print
US consumer inflation picked up slightly in July, but was exactly as expected, according to the measure that is known to be favoured by the Federal Reserve.
The personal consumption expenditures index rose by 4.2% in the year to July, the US Bureau of Economic Analysis said, compared to annual growth of 4.1% in June. The index rose by 0.2%in July when compared to June.
US PCE Core Deflator (M/M) Jul: 0.2% (exp 0.2%; prev 0.2%)
– US PCE Core Deflator (Y/Y) Jul: 3.3% (exp 3.3%; prev 3.0%)
– US PCE Deflator (M/M) Jul: 0.2% (exp 0.2%; prev 0.2%)
– US PCE Deflator (Y/Y) Jul: 4.2% (exp 4.2%; prev 4.1%)
— LiveSquawk (@LiveSquawk) August 31, 2023
The core deflator rose 0.2% in July compared to June, and by 3.3% on an annual basis, higher than June’s 3.0%.
Separate data showed weekly jobless claims dropping to 228,000, short of estimates, of 235,000 in the week ended August 26, and compared with 230,000 claims a week earlier.
Futures have climbed after the data with all three major indices looking set to open higher.
7:00am: Futures steady ahead of PCE figures
US stocks are expected to make steady progress on Thursday with all eyes on the personal consumption expenditures (PCE) print, the Federal Reserve’s preferred inflation gauge, to see if inflationary pressures continue to ebb.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.3% higher, while those for the S&P 500 rose 0.1%, and contracts for the Nasdaq 100 futures were down 0.1%.
Economists expect the core PCE number to tick up to 4.2% on an annual basis in July, slightly higher than the 4.1% reading in June, which was the smallest increase since October 2021.
Ian Shepherdson at Pantheon Macroeconomics sees a decent chance of a 0.3% monthly increase in the July core PCE deflator today, above the consensus, 0.2%.
“This would be an unwelcome development, as this will be the last personal income and spending report before the next Fed meeting, on September 19-to-20,” he said.
“But we doubt that an upside surprise in the July core PCE will materially boost the chances of another rate hike, not least because it would be driven largely by a spike in the hugely volatile financial services component.”
“Moreover, our base case is that the August core CPI, due September 13. will print 0.2% for the third straight month, down sharply from the previous trend of 0.4-to-0.5%,” he added.
Elsewhere, weekly jobless claims figures will give a further indication as to the health of the US jobs market ahead of non-farm payrolls on Friday.
A couple of soft data indicators this week – JOLTS job vacancies and ADP private payrolls – have suggested that interest rate rises are now feeding through to the labour market.
It’s also looking like a busy day for results with discount retailer, Dollar General, spam maker Hormel Foods (NYSE:HRL) and jeweller Signet Jewelers reporting earnings before the bell.
PC maker Dell, leisure wear maker Lululemon and chipmaker Broadcom will report after the market close.
Stocks on the move include Salesforce.com, up 5.4% in pre-market trading, after it raised guidance alongside reporting a rise in second quarter revenue and a big jump in net income after the closing bell Wednesday.
The San Francisco-based cloud-based software firm said in the three months to July 31, revenue rose 11% to $8.60 billion from $7.72 billion the year prior, while GAAP diluted earnings per share soared to $1.28 from $0.07. Net income climbed to $1.27 billion from $68 million.
Marc Benioff, chair and chief executive said: “Based on our performance and what we see in the back half of the year, we’re raising our fiscal year ’24 revenue, operating margin, and operating cash flow growth guidance.”