November PCE Inflation Comes In Lower Than Expected, Pushes Benchmark Indices Higher: Retail Sentiment Mixed

Core PCE, which excludes food and energy components, increased 0.1% in November month-on-month and rose 2.8% from a year ago.

The personal consumption expenditures (PCE) index, the Federal Reserve’s preferred inflation gauge, rose 0.1% in November from the preceding month while it increased 2.4% annually, lower than an estimated 2.5% rise. Following the release of the figures, the S&P 500 and the Nasdaq climbed over 1.7% by Friday noon.

According to the Bureau of Labor Statistics (BLS), prices for goods rose less than 0.1%, and prices for services increased 0.2%. Food prices increased 0.2%, and energy prices also increased 0.2%.

Core PCE, which excludes food and energy components, increased 0.1% in November month-on-month and rose 2.8% from a year ago.

Meanwhile, personal income rose $71.1 billion or 0.3% at a monthly rate in November while disposable personal income, which is personal income less personal current taxes, increased 0.3%.

Chris Larkin, managing director of trading and investing at E-Trade Morgan Stanley reportedly said that sticky inflation appeared to be a little less stuck this morning.

“The Fed’s preferred inflation gauge came in lower than expected, which may take some of the sting out of the market’s disappointment with the Fed’s interest rate announcement on Wednesday,” he said, according to a CNBC report.

On Wednesday, the Federal Reserve delivered the much-anticipated 25 basis point rate cut, bringing the key interest rate down to 4.25%- 4.5%, levels seen in December 2022.

Cleveland Federal Reserve President Beth M. Hammack, the lone dissenter who opted to keep the key interest rate unchanged at 4.5%-4.75% in the December policy, said on Friday that her decision was driven by recent strong economic data and expectations of inflation remaining high next year.

Meanwhile, benchmark U.S. indices registered a smart recovery on Friday following the release of the PCE data. The SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust, Series 1 (QQQ) traded over 1.7% higher on Friday noon. However, retail sentiment on Stocktwits ranged from ‘bullish’ to ‘bearish’ for these ETFs.

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