Gentle Glide

Gentle glide.  Stocks rose marginally yesterday in a low volume session on a benign economic number.  In the quiet before the earnings storm, traders cautiously drove the S&P and NASDAQ Composite indexes to new highs.

WHAT YOU NEED TO KNOW:

1)  Consumers are consuming.  According to a Bureau of Economic Analysis number released yesterday, Personal Consumption Expenditures rose a greater than expected +0.9% in March.  This despite Personal Income only rising by +0.1% for the same period, below expectations.  Confident consumption is important for the US GDP in which almost 70% is attributed to the consumer.

2)  Inflation remains… a non-issue.  Yesterday’s release of the month-over-monthe Core PCE Deflator, the Fed’s favorite measure of inflation, came in flat for the month which was lower than economists’ estimates.  The year over year Core Deflator also came in below expectations at +1.6%, well below the Fed’s +2.0% target.  These low inflation numbers provide the Fed further justification for putting rate cuts designed to tackle inflation on hold for now.

3)  The two-day Federal Open Market Committee will start today.  The Fed is largely expected to hold rates steady at 2.5%.  The big event will be tomorrow as Fed watchers look for even any slight modifications to their policy statement.  The press release that follows will most likely emphasize the Fed’s patience stance.  Monday’s PCE numbers are evidence that the Fed has room for patience with even the possibility of lowering rates.  Traders will be watching closely.

THE MARKETS:

Stocks bubbled up yesterday in a very uneventful low volume session despite the very positive economic release as traders contemplated the overbought conditions that now prevail in the markets. The S&P 500 traded up by +0.11% led by the Financial sector, the Dow Jones Industrial Average climbed by +0.4%, the Russell 2000 ascended by +0.41%, and NASDAQ 100 nudged up by +0.16%. Bonds eased off a bit bringing 10 year treasury yields to 2.52%, up by +2 basis points.  Crude oil managed to trade up slightly by +0.32% after an almost -3% drop in the prior session attributed to Trump comments.

WHAT TO LOOK FOR TODAY:

This morning we will get Consumer Confidence from the Conference  Board which is expected to show a rise to 126.8 from 124.1.  The number’s components Present Situation and Expectations will be carefully scrutinized to get a handle on the consumer, which has proven to be resilient based on yesterday’s number, despite last quarter’s GDP that suggested the consumer is slowing down.  After a miss by Alphabet/Google after last nights close traders will watch pre-bell releases carefully. Releases expected this morning include Eli Lily, Merck, Philips 66, Pfizer, Mastercard, Ingersoll-Rand, HCA Healthcare, GE, and General Motors.  After the bell we will hear from Apple, chipmaker AMD, and Amgen, amongst others.  The FOMC meeting will start today, though traders will have to wait until tomorrow to get any news from the Fed.

daily chartbook 2019-04-30

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