U.S. stocks diverged on Wednesday as investors digested new data showing inflation made little progress toward the Federal Reserve’s 2% target in October.
After hitting all-time highs on Tuesday, the S&P 500 (^GSPC) fell about 0.2%, while the Dow Jones Industrial Average (^DJI) rose about 0.3%. The tech-heavy Nasdaq Composite (^IXIC) was down about 0.7%.
Mood is subdued as the Thanksgiving holiday approaches, with markets closing Thursday and closing early Friday. But the Federal Reserve is returning to the spotlight after being somewhat overshadowed by the debate over the impact of President-elect Donald Trump’s tariff plans and cabinet picks.
The latest reading of the Federal Reserve’s preferred inflation gauge showed price increases held steady in October from the previous month, raising questions about whether progress toward reaching the central bank’s 2% goal has stalled. .
The core Personal Consumption Expenditure (PCE) index, which excludes food and energy costs and is closely watched by the central bank, rose 0.3% from the previous month during October, in line with Wall Street expectations. Street of 0.3% and the September reading. . Over the past year, underlying prices rose 2.8%, in line with Wall Street expectations but above the 2.7% seen in September.
Traders currently see a roughly 34% chance that the Federal Reserve will keep rates steady at that meeting, compared with about 24% a month earlier, according to the CME FedWatch tool.
Also released on Wednesday, the second estimate of third-quarter GDP was unchanged, showing the U.S. economy grew at an annualized rate of 2.8% in the period. Meanwhile, weekly jobless claims continued to decline with 213,000 jobless claims filed in the week ending Nov. 23, down from 215,000 the week before.
Trump on Tuesday named Jamieson Greer, a veteran of his first term, as U.S. trade representative. Since Greer was heavily involved in Trump’s original tariffs on China, Wall Street is weighing what his role could mean for the big new tariffs promised on major U.S. trading partners.
On the corporate front, Dell (DELL) stock sank more than 10% after quarterly revenue fell short amid falling PC demand. Peer HP (HPQ) shares also fell after the results, also down more than 10%.
LIVE 6 updates
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A key inflation indicator shows that price increases remained stable from the previous month
The latest reading of the Federal Reserve’s preferred inflation gauge showed price increases held steady in October from the previous month, raising questions about whether progress toward reaching the central bank’s 2% goal has stalled. .
The core Personal Consumption Expenditure (PCE) index, which excludes food and energy costs and is closely watched by the central bank, rose 0.3% from the previous month during October, in line with Wall Street expectations. Street of 0.3% and the September reading. .
Over the past year, underlying prices rose 2.8%, in line with Wall Street expectations and up from the 2.7% seen in September. On an annual basis, headline PCE rose 2.3%, a rebound from the 2.1% seen in September.
Read more here.
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JPMorgan sets S&P target of 6,500 by 2025 as ‘American exceptionalism’ advances
Another Wall Street strategist sees a strong backdrop for the U.S. economy and a broadening corporate earnings picture that will drive stocks higher in the coming year.
JPMorgan’s global equity strategy team, led by Dubravko Lakos-Bujas, forecasts that the S&P 500 (^GSPC) will reach 6,500 points by the end of 2025, joining the likes of Goldman Sachs and Morgan Stanley, which issued the same aim. The target represents approximately an 8% increase from current levels.
Lakos-Bujas wrote that continued “American exceptionalism,” continued earnings growth and interest rate cuts by the Federal Reserve will be a tailwind for stocks in the year ahead. He argued that the United States is likely to remain the “engine of global growth with an expanding business cycle, a healthy labor market, expanded AI-related capital spending, and prospects for strong capital markets and deal activity.” “.
He added that “increased geopolitical uncertainty and evolving political agendas are introducing unusual complexity to the outlook, but the opportunities are likely to outweigh the risks. The benefits of deregulation and a more business-friendly environment are likely to be underestimated.” companies, along with the potential to unlock productivity gains and capital deployment.”
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Stocks hesitate in the face of inflation
U.S. stocks paused near record highs on Wednesday as investors awaited a reading from the Federal Reserve’s favorite inflation gauge to provide clues about the path of interest rates.
After hitting all-time highs on Tuesday, the S&P 500 (^GSPC) fell about 0.2% at the open, while the Dow Jones Industrial Average (^DJI) rose 0.1%. The tech-heavy Nasdaq Composite (^IXIC) was down about 0.3%.
The October printout of the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures Index, will be released Wednesday morning at 10 a.m. ET. The focus is on whether inflation has stagnated.
Economists expect the annual “core” PCE – which excludes food and energy – to have registered 2.8% in October, compared to 2.7% seen in September.
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Weekly jobless claims fall, GDP remains stable
Weekly jobless claims rose less than expected last week and hit a seven-month low, as the impact of labor strikes and severe weather continued to ease.
New data from the Labor Department showed that 213,000 initial jobless claims were filed in the week ending Nov. 23, down from 215,000 the week before and down from the 215,000 economists expected.
Meanwhile, the number of continuing claims for unemployment benefits reached 1.9 million, 9,000 more than the previous week and the highest level since November 2021.
In other economic data, the second estimate of third-quarter GDP remained unchanged, once again showing that the US economy grew at an annualized rate of 2.8%.
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Good day. This is what is happening today.
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About those possible Trump tariffs
Shares of automakers General Motors (GM) and Ford (F) fell Tuesday following Trump’s tariff threats toward China, Mexico and Canada.
GM lost 9%, while Ford fell 3% as both companies have a strong presence in Mexico.
But automakers aren’t the only companies that could be hurt by tariffs, of course.
Think computers and t-shirts!
Here’s what HP Inc. (HPQ) CEO Enrique Lores and Abercrombie & Fitch (ANF) CEO Fran Horowitz told me on the tariff issue.
Enrique Lores
“Some of that [cost of potential tariffs] We will have to address consumers given the global margin we have in the categories. But again, we have to wait and see what the final rates are so we can define what the exact plan will be.”
Fran Horowitz
“When we really understand what is happening, we will have to make some adjustments and we will adjust accordingly. It is exactly what we did in 2018, when we had the same challenge. In 2024 we will not receive more than 5% or 6% of our US income coming from China, we’re looking at it country by country, but the agility that we’ve built into our supply chain is really what’s going to get us through this.”
