Markets Pause Mid-Week Ahead of PCE Friday
Wednesday, March 27th, 2024
Market indices appeared to be cruising toward a green finish Tuesday, reversing the previous two sessions on the Dow and S&P 500, but lost their mojo within the last hour of regular trading yesterday. The higher the bull market had been through the first near-quarter of 2024 — and going back through the last quarter of 2023 — the easier it was to see that valuations have been getting stretched beyond reasonable expectations. There was no major news event around 3pm ET yesterday that we can point to why all four major indices skidded into the red.
Thus far this week, we’ve seen a mixed bag from economic report results: on Monday we saw lower New Home Sales for February, while on Tuesday the Case-Shiller home sales survey for January came in higher. Durable Goods for February exceeded expectations while Consumer Confidence in March, still within a healthy range, reported lower than anticipated. We take a break from major economic data this Hump Day.
Ahead of today’s open, the latest of the non-earnings-season companies reporting was Cintas CTAS, an Ohio-based uniforms and maintenance supplies company, which beat-and-raised in its fiscal Q3 report this morning on both top and bottom lines. Earnings of $3.84 per share easily surmounted the $3.56 expected (and $3.14 per share from Q3 last year), on $2.41 billion in quarterly sales, +9.9% year over year and higher than the $2.38 billion in the Zacks consensus. Cintas has not missed on its bottom line since fiscal Q2 of 2017.
Tomorrow, the second (and final) revision to Q4 GDP will be in the books, likely in-line with the previous print at +3.2%. We’ll also see Pending Home Sales for February and Consumer Sentiment data, along with Weekly Jobless Claims. Some of this data — not housing or jobless claims — is part of a bigger report from the U.S. federal government’s Bureau of Economic Analysis (BEA), which brings forth its biggest monthly results Friday.
Those results, the Personal Consumption Expenditures (PCE), is the Fed’s favorite metric for gauging inflation. On Friday morning, year-over-year PCE on headline is expected to come in at +2.5%, +2.8% on core. You’ll note these figures are among the closest we’ve seen in years toward the optimum 2% inflation rate the Fed is geared toward achieving.
Because this data collects from other economic reports, the chance of major revisions month over month are relatively minor. However, should we see a deeper gouge toward 2% on these numbers, this may firm the notion that a quarter-point interest rate cut is indeed on the way.
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