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PCE Report Puts Rally to Test as Nasdaq 100 Hovers Above Key Support

Published 29/02/2024, 08:49
Updated 20/09/2023, 11:34

Stocks finished the day lower but managed to hold onto support, and it seems to suggest that today we are likely to see some kind of move.

Which direction is tough to say, especially with the PCE report coming in the morning. Estimates are for PCE to rise by 0.3%, up from 0.2% last month, and rise by 2.4% y/y, down from 2.6% last month.

The core PCE is expected to rise by 0.4% m/m, up from 0.2% and by 2.8% y/y, down from 2.9%.

Again, I have no real view here because sell-side analysts have already gone through and parsed all of the data from the CPI and PPI and factored that into their estimates.

But it would seem like analysts’ estimates for core PCE and PCE y/y have been pretty much in line with expectations for the past couple of months, or slightly too high.

PCE Defy Index

Regardless of the PCE report, inflation expectations are rising, and the 2-year breakeven yesterday climbed to 2.77%; I would be curious to see if it makes it back to the 3% mark or not.

That was an important spot in the past, and it is likely to serve as an important spot should it get there in the future.

US Breakeven 2-Year Index Chart

Also of note yesterday was that the Dallas Fed President, Lorie Logan, commented that tapering the pace of QT isn’t the same as stopping QT.

The article quoted her as saying:

“What surprised me from the market reaction was that some, I think, connected slowing to stopping,” she goes on to say, “We just need to disconnect those concepts — that slowing doesn’t mean stopping, but really just means managing the pace.”

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So it only took since the beginning of January for this to be discussed again, but I guess it’s better late than never. Was this a sign that the Fed is starting to get uncomfortable with all the easing of financial conditions we have seen since November?

Will the Fed have to start walking back the timing and the number of rate cuts below 3, next?

I do not know, but I guess that we may be about to find out. If the current trends persist and the market is right, then inflation will not go anywhere but higher, and oil has not even broken out yet.

Oil tried to break out yesterday but didn’t hold those gains and instead closed back below resistance.Crude Oil-1-Hour Chart

Meanwhile, the NASDAQ 100 managed to close right on support yesterday, at 17,850, and I guess we will find out if that support holds today.

It appears to be a descending triangle; my understanding is that descending triangles typically are bearish and result in lower prices. I think that the gap at 17,480 is screaming to be filled.NDX-100-1-Hour Chart

Anyway, another day, another stock is moving by some bizarre amount after hours. yesterday, it is Snowflake’s (NYSE:SNOW) turn after it provided weaker-than-expected product revenue for the first quarter.

So the stock is down, oh, about 24%. I really can’t remember a time when we have seen moves of this magnitude regularly and of this size. SNOW isn’t precisely a penny stock with a market cap of about $75 billion.Snowflake Inc-1-Hour Chart

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