Inflation continues to fall

Key takeaways

• S&P 500 hits 42nd high, signaling broad market strength with 80% of stocks above moving averages
• China’s stimulus program is boosting stocks, but concerns remain about the long-term effectiveness of government intervention
• The PCE data suggests controlled inflation, likely giving the Fed room for future rate cuts

Stocks closed higher on Thursday as the S&P 500 set another new high, totaling 42. The S&P 500 closed higher by 0.4%. The Nasdaq Composite rose 0.6%, while the Russell 2000 and Dow Jones Industrial Average rose 0.5 and 0.6%, respectively. We’ll see if markets can hit a 43rd new high this year after this morning’s Personal Consumption Expenditures (PCE) report.

Prior to this morning’s PCE report, forecasts were for core PCE growth of 0.2% month-over-month and 2.7% year-over-year. While the annual data was in line with expectations, the monthly data amounted to only 0.1%. This seemingly suggests that inflation is under control, giving the Fed leeway to lower interest rates. Prior to the release of the PCE report, the CME Fed Watch Tool was evenly split for a 25 or 50 basis point rate cut in November. Following economic news, these rates remained unchanged.

Some individual stock results worth keeping an eye on on Thursday include Coinbase. Coinbase shares rose 7% on Thursday. The company’s shares are very closely correlated with bitcoin, which flirted with 65,000. dollars, after it dropped to just over 45,000 in August. dollars. Micron shares rose nearly 15% on Thursday after the chipmaker reported strong earnings. Shares of Super Micro Computer fell 12% after news that the server maker was under investigation for accounting fraud.

Chinese stocks also posted another strong gain. The iShares China Large-Cap ETF gained 8% after China announced additional stimulus measures. This time, shares rose due to a reduction in banks’ reserve requirements to encourage more lending. Chinese stocks have surged nearly 16% this week amid sweeping stimulus plans. It feels like the government is throwing everything, including the kitchen sink, at the economy. While the impact has been positive on equities so far, I think it’s worth asking what else the government can do if these measures prove insufficient.

Among the stocks I’m watching today is Costco. The company beat revenue, but same-store sales were weak and the company’s stock fell 1.4% pre-market. DirectTV is in talks to purchase Dish. Dish is owned by EchoStar and DirectTV is owned by AT&T. Both companies have seen their subscriber numbers decline, losing customers to competitors such as Google-owned YouTube TV. The merger could open up opportunities for more competitive pricing and will also include Dish’s Sling TV service.

Another potentially big story that hasn’t gotten much publicity is the upcoming strike at ports stretching from Maine to Texas. The current contract under which the employees work expires on Monday. If a new contract is not signed by then, approximately 45,000 people may go on strike. employees. A JPMorgan analyst estimates that the financial impact of the strike will cost the U.S. economy $5 billion a day. Car manufacturers may be among the industries particularly affected.

Another issue that interests me is market volatility. The VIX is currently just below 16. As the market makes new highs, much lower volatility can be expected. But I think what’s happening is there’s a lot of demand for protection in the form of buying options. When this type of demand is widespread, it is often adversarial and helps the stock rise. This happens when demand decreases and investors are less afraid of falling stock prices.

Following this week’s PCE data, next week will be a big week for economic data, with the latest employment data due next Friday. Then, two weeks from today, the earnings season will begin, and we’ll hear, among other things, JPMorgan. We are therefore entering a period of abundant macroeconomic data and reports on financial results. I’ll write more about this next week, but for now it might be a good time to take inventory of your existing positions and what you want to pursue.

For today, I want to see how the market will digest the PCE data. As I mentioned, we’ve set 42 records on the S&P 500 this year, and the recent strength comes despite the fact that market darling Nvidia remains relatively unchanged this quarter. In fact, as of Thursday’s close, 80% of S&P 500 stocks are trading above their 50-day moving average, and almost the same number are trading above their 200-day moving average, suggesting the rally is fairly broad-based. Let’s see if we can continue to climb higher with broad market share. As always, I will stick to your investment plan and long-term goals.

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