The market begins a week that will be marked by employment.
On Monday, the Nasdaq led Wall Street gains following mixed numbers from Thursday. It ended March and, consequently, the first quarter of the year on a high note. This performance enabled the S&P 500 to record its best start to a year since 2019.
The market was closed on Friday for Good Friday, during which the February PCE consumer deflator was released. This inflation measure is favored by the Federal Reserve (Fed). Investors discounted this data in the current session, influenced by Jerome Powell’s statement that there’s no need to rush interest rate cuts.
Furthermore, last week, Fed Chairman Jerome Powell emphasized that the economy is at a crucial juncture with a strong labor market. Therefore, he stated that there would be considerable caution in rate cuts to avoid negatively impacting the thriving stock market.
Personal consumption expenditures (PCE) price index inflation came in at 2.5%, barely above the 2.4% recorded in January, and in line with the consensus forecast. The underlying variable, meanwhile, moderated slightly to 2.8% from last month’s 2.9%, also in line with expectations.
Market analysts consider it bad news for inflation that personal spending in February increased more than estimated. However, the good news is that personal income fell faster than expectations.
Accordingly, for several market analysts, these numbers are a sign that inflation will be much more difficult to overcome. Currently, the price level may be stuck near +3%, which suggests the Fed insists on gaining more confidence in inflation’s trajectory. Therefore, a delay in initiating rate guidance may be possible.
Also, the fact that the U.S. economy continues to grow at such a strong pace and that the labor market is so strong gives the Fed the opportunity to increase its confidence that inflation will decline before cutting rates.
Analysts have come to believe that the first rate cut may come in June, following the PCE release and indications that the U.S. economy is beginning to grow at a solid pace.
However, the following macro data will be crucial to anchor this expectation, which is why the official employment report, to be released next Friday, will be influential. Similarly, the Job Openings and Labor Turnover Survey (JOLTS) will be released this Tuesday, while on Wednesday it will be the turn of the ADP employment data and on Thursday the weekly unemployment claims.
Corporates and other markets
In the corporate sector, Tesla has raised the price of its Model Y in the U.S. by $1,000 since April 1. Recently, Tesla also increased the prices of its vehicles in Europe by around €2,000.
Microsoft plans to sell its chat and video application ‘Teams’ independently from its Office suite worldwide. This move, already announced in Europe, aims to comply with EU antitrust rules.
Furthermore, Micron Technology stocks are up 4% after Bank of America increased the firm’s price target to 144 dollars per share, from the previous 120 dollars.
Looking at other markets, West Texas crude oil is up 0.19% ($83.31) and Brent crude oil is up 0.06% ($87.04). The euro depreciated 0.12% ($1.0778), and the gold ounce rose 1.74% ($2,277).
Additionally, the yield on the 10-year U.S. bond increased to 4.268%, and bitcoin decreased by 1.37% to $70,067.
