PCE Inflation Declined in December

Pre-market futures are relatively flat, aside from a bit more selling in the leading index for the week and year to date: the Dow is +10 points at this hour, the S&P 500 is -10 and the Nasdaq is -50 points. That said, the tech-heavy Nasdaq is +3% over the last five sessions, +10% since the first of the year. All major indices are in the green over these periods.

Personal Consumption Expenditures (PCE) for December came in at +0.2% on headline month over month, the lightest number we’ve seen since January of 2022, and off cycle highs of +0.7% in October. Core PCE month over month reached +0.3%. Both of these prints are pretty much in-line with analysts’ expectations.

Year over year, headline PCE came in at +5.0%, a half-point lower than November’s +5.5% — and the lowest print we’ve seen since September 2021. Core year over year reached +4.4%, 100 bps below where we were in February of last year. The last time this metric was lower was back in October of 2021. Real Disposable Income in December hit +2.5%, 20 bps lower month over month. Real Consumer Spending tallied -3.4% last month — well below the -2.4% we saw in November.

Put all of this together and we see a continuation of the nice, measured slow-down in economic developments as the Fed has kept ratcheting interest rates incrementally over the past 10 months. We;’ll get another hike on February 1st, which this morning’s data would suggest will remain at the expected 25 bps. Again, Goods inflation is behaving (-0.7% in today’s PCE report) better than Services inflation (+0.5%).

American Express (AXP) just broke its streak of eight straight quarters at or above earnings estimates with its -5% miss on Q4 EPS to $2.07 per share. Revenues also came in a tad below estimates to $14.18 billion in the quarter. But the stock is up +6.7% in the pre-market this hour on encouraging words about an expected revenue surge and that CEO Stephen Squeri remarks, “We’re not seeing recessionary signals.” Shares are now up double-digits year to date.

Chevron (CVX) also came up short on its Q4 bottom line this morning: earnings of $4.09 per share versus $4.16 in the Zacks consensus. It’s way up from the $2.56 per share year over year. Quarterly sales, on the other hand, posted a big +8% beat to $56.47 billion. Shares are down -2% on the news, but still up roughly +2.6% from the start of the year.

Colgate-Palmolive (CL) met estimates of 77 cent earnings per share exactly in its Q4 report this morning. Revenues of $4.63 billion was up a solid +1.21% from expectations, and above the year-ago quarter’s $4.4 billion. The household products giant has yet to see an earnings miss since back in Q2 of 2019, yet pre-market futures are selling off -4.4% in today’s pre-market activity.

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