- US stock indexes ended lower despite market excitement over the latest PCE data.
- Both the composite and core indexes of personal consumption expenditures increased 2.6% from the previous year.
- The stock market finished the first half of 2024 on a strong note, with the S&P 500 up nearly 15%.
U.S. stock indexes fell on Friday after briefly hitting record highs as investors cheered the latest inflation report.
The Personal Consumption Expenditures Price Index, the Federal Reserve’s go-to inflation gauge, fell to its lowest level in three years. Both the core and headline PCE rates fell to 2.6% year-over-year in May, slightly down from the previous month.
Private consumption also increased from the previous month, with real goods spending recovering from April’s slump.
“Soft inflation data strengthens the case that the Fed can begin to cut rates in the coming months,” said Jeffrey Roach, chief economist at LPL Financial. “As long as incomes are growing at a healthy pace, consumers will continue to spend. The key is the labor market, and attention should turn to nonfarm payrolls next week for a fresh look at the job market.”
While expectations for monetary policy remained unchanged in May, investors remain confident that interest rates will be cut again this year, with futures markets currently pricing in the possibility of two rate cuts.
While weak inflation wasn’t enough to keep the indexes in the positive through Friday, the stock market still finished the first half of 2024 strong. Year-over-year, the S&P 500 rose 14.1%, outpacing the Nasdaq’s 16.6% gain.
“But there are still areas of relative weakness,” wrote David Morrison, senior market analyst at Trade Nation. “The traditional Dow Jones Industrial Average rose just 4%, while the Russell Average rose just 1%. Are these harbingers of weakness to come, or will they supplant market leaders in the second half of the year?”
The problem now is concerns about a polarized market, with only a handful of stocks actually driving the index higher. At the same time, interest rates remain high amid signs of a slowing economy, and Nvidia’s $430 billion surge this week has added to concerns about the long-term prospects of the AI-driven bull market.
As of the close of trading at 4pm on Friday, US stock indexes were as follows:
What else is happening today:
Commodities, Bonds and Cryptocurrencies:
- West Texas Intermediate crude oil fell 0.53% to $81.3 a barrel, while the international benchmark Brent crude was down 0.18% to $84.77 a barrel.
- Gold fell 0.12% to $2,326 per ounce.
- The yield on the 10-year Treasury note rose 6 basis points to 4.349%.
- Bitcoin was essentially flat at $60,809.21.
