Dow Jones rises, Nasdaq falls after key Fed inflation gauge shows halting progress

The latest reading of the Federal Reserve’s preferred inflation gauge showed price increases were flat in October from the previous month, raising questions about whether progress toward the bank’s 2% target central are in neutral.

The core personal consumption expenditures (PCE) index, which excludes food and energy costs and is closely watched by the central bank, rose 0.3% from the previous month in October, in line with Wall’s expectations Street by 0.3% and at the September reading. .

Compared to the previous year, core prices rose 2.8%, in line with Wall Street expectations and above the 2.7% seen in September. On an annual basis, overall PCE increased by 2.3%, up from 2.1% in September.

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Another The Wall Street strategist believes the strong backdrop to the U.S. economy and broadening corporate profits will drive stocks higher in the year ahead.

JPMorgan’s global equity strategy team, led by Dubravko Lakos-Bujas, believes that the S&P 500 (^GSPC) reaching 6,500 by the end of 2025, joining groups like Goldman Sachs and Morgan Stanley, which issued the same objective. The target represents an increase of approximately 8% from current levels.

Lakos-Bujas wrote that continued « American exceptionalism, » continued profit growth and interest rate cuts from the Federal Reserve will be a tailwind for stocks in the year ahead. He argued that the United States will likely remain the « engine of global growth with an expanding business cycle, a healthy labor market, broadening AI-related capital spending, and the prospect of a market robust capital and transaction activity.”

He added: “Increased geopolitical uncertainty and the evolving political agenda introduce unusual complexity to the outlook, but the opportunities will likely outweigh the risks. The benefits of deregulation and a more business-friendly environment are probably underestimated, as is the potential to unlock productivity gains and capital deployment. »

U.S. stocks paused near their record highs on Wednesday as investors awaited a reading of the Federal Reserve’s preferred inflation gauge to provide clues on where interest rates are moving.

After hitting records on Tuesday, the S&P 500 (^GSPC) fell about 0.2% at the open while the Dow Jones Industrial Average (^DJI) increased by 0.1%. The Nasdaq Composite, with a strong technological component (^IXIC) was down about 0.3%.

The October version of the Fed’s favorite inflation gauge, the Personal Consumption Expenditures Index, is due out Wednesday morning at 10 a.m. ET. The focus is on whether inflation has stalled.

Economists expect ‘core’ annual PCE — which excludes food and energy — stood at 2.8% in October, up from 2.7% observed in September.

Weekly jobless claims rose less than expected last week and hit a seven-month low, as the impact of strikes and bad weather continued to ease.

New data from Ministry of Labor showed that 213,000 initial unemployment claims were filed in the week ending Nov. 23, down from 215,000 the previous week and the 215,000 expected by economists.

At the same time, the number of continued applications for unemployment benefits reached 1.9 million, an increase of 9,000 from the previous week and the highest level since November 2021.

Elsewhere in economic data, the second estimate of third-quarter GDP was unchanged, once again showing that the US economy grew at an annualized rate of 2.8%.

Stocks of automakers General Motors (General manager) and Ford (F) were limited on Tuesday following Trump’s tariff threats against China, Mexico and Canada.

GM lost 9%, while Ford lost 3%, with both companies having a strong presence in Mexico.

But car manufacturers are of course not the only ones affected by customs duties.

Think about computers and T-shirts!

Here’s what HP Inc. (HPQ) CEO Enrique Lorès and Abercrombie & Fitch (ANF) CEO Fran Horowitz spoke to me about the pricing subject.

Enrique Lorès

« Some of that (the cost of potential tariffs) will have to be returned to consumers, given the overall margin we have in the categories. But again, we have to wait and see what the final tariffs will be to be able to define exactly what the rates are going to be.

Fran Horowitz

« When we really understand what’s going on, we’ll have to make some adjustments, and we’ll adjust accordingly. That’s exactly what we did in 2018 when we faced the same challenge. In 2024, we won’t receive more than 5 or 6% of our U.S. revenue coming from China We’re looking at it on a country by country basis, but the agility that we’ve built into our supply chain is really what’s going to help us manage this.