Mid-Week Market Minute 2.28.24

Stocks Mixed This Week; Key PCE Report Coming Thursday

Global stocks were mixed this week as markets searched for direction ahead of Thursday’s highly anticipated Personal Consumption Expenditure (PCE) inflation report. As of Wednesday’s open, the S&P 500 was lower by about 0.50%, while the Russell 2000 (small cap index) was higher by nearly 2%. On the international front, both developed and emerging markets were mostly unchanged on the week.

Inflation and interest rates will remain a primary driver of markets in the near-term, and market participants will be paying close attention to Thursday’s PCE report, which is the Federal Reserve’s preferred measure of inflation. The rate of inflation is expected to accelerate month-over-month for both the headline and core indices, while year-over-year inflation is expected to decelerate. Separately, Wednesday morning brought the second estimate of GDP growth for the fourth quarter of 2023, which increased at a rate of 3.2%, less than the 3.3% initially estimated. The downward revision of 0.1% was primarily due to smaller-than-expected inventory growth, which was offset by upward revisions in government and consumer spending. Overall, economic growth came in at 2.5% for the entire year of 2023, avoiding a recession by a wide margin. Looking ahead to the first quarter of 2024, data from the Atlanta Fed’s GDPNow data shows an estimate for GDP of 2.3% as of Feb. 27. 

Against the backdrop of a resilient economy and sticky inflation, recent comments from Fed officials indicate the central bank isn’t in any hurry to cut interest rates without more evidence that inflation is softening. Notwithstanding a significant surprise on the inflation or economic front, we continue to believe the Fed likely will keep interest rates steady for the next two meetings, before potentially initiating a rate cut in June.

Source: GSAM, CNBC, JPMorgan

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