SPY, QQQ See Strong Retail Activity On Stocktwits Ahead of Fed’s Key Inflation Gauge Release
Morgan Stanley expects the core monthly PCE rate to be 0.35%, rounding off to 0.4%, nudged higher by strong goods inflation and an acceleration in core services prices, excluding housing.
FollowU.S. stocks have been sliding ever since a three-session winning run was snapped on Tuesday. A key test awaits investors on Friday as the Bureau of Economic Analysis (BEA) is scheduled to release a report that comprises a key inflation gauge.
The BEA is due to release the February personal income and spending report at 8:30 a.m. ET. The report also includes the personal consumption expenditure (PCE) index, which the Federal Reserve relies on while making monetary policy decisions.
Economists, on average, expect the PCE index to rise 0.3% month over month (MoM) and 2.5% year over year (YoY) in February, according to data provided by Bloomberg. The forecasted monthly and annual growth rates are aligned with the pace seen in January.
The core PCE index may have risen 0.3% MoM, similar to January’s growth. The annual change in the core PCE index is expected to accelerate slightly to 2.7% from 2.6%.
In a note released Sunday, Morgan Stanley Chief Global Economist Seth Carpenter said he expects core monthly PCE rate of 0.35%, rounding off to 0.4%, nudged higher by strong goods inflation and an acceleration in core services prices, excluding housing.
Carpenter estimates the PCE to rise 0.32%, thanks to a deceleration in food and energy inflation.
The economist forecasts personal income and spending to rise by 0.4% each.
Friday’s inflation report assumes importance due to fears that President Donald Trump’s tariffs and retaliation by other nations have the potential to fan inflation, thwarting hopes of more rate cuts.
Trump announced a 25% tariff on auto imports late Wednesday, which weighed down shares of auto and auto parts makers in Thursday’s session. The tariffs will go into effect on April 3.
Notwithstanding the ongoing uncertainty and volatility, retail sentiment toward the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ) was bullish by late Thursday.
SPY sentiment and message volume March 28, as of 3:53 am ET | Source: Stocktwits
QQQ sentiment and message volume March 28, as of 3:53 am ET | Source: Stocktwits
A bullish watcher said they expect a massive “V-shaped” rally beginning on Friday.
Another said the February PCE reading is priced into the market and predicted a gap-up opening on Friday.
The iShares Russell 2000 ETF (IWM), an exchange-traded fund (ETF) tracking the Russell 2000 Index, ended Thursday down 0.48% at $204.61, taking its year-to-date losses to 7.19%.
Mega-cap stocks have led the current downturn, with the Roundhill Magnificent Seven ETF (MAGS), which tracks the performance of the Magnificent Seven stocks, having fallen a steeper 12.28%.
The SPY ETF ended Thursday’s session down 0.27% at $567.08 and the QQQ ETF lost 0.57% before closing at $481.62. These two ETFs have lost 2.95% and 5.65%, respectively, this year.
Investors may also monitor bond yields. The benchmark 10-year U.S. Treasury note yielded 4.332% early Friday, down 70 basis points. Falling bond yields reflect expectations for an easier monetary policy environment.
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