Stocks Edge Higher Despite Inflation Concerns
Good morning,
The Dow (+0.6%), NASDAQ (+0.9%), S&P 500 (+0.5%), and EAFE (+0.1%) all posted fractional gains, bouncing back from the prior week's modest declines. Bonds were mixed, with taxable bonds gaining 0.1%, and tax-free municipal bonds falling 0.2%. The 10-year remained steady, finishing the week at 4.73%.
The Fed's preferred inflation gauge, the Personal Consumption Expenditures Index (PCE), rose 3.7% YoY, coming in slightly above estimates. Core PCE rose 3.3%, in line with expectations. Inflation remains stubbornly above the Fed's 2% target, shifting investor expectations from potential rate cuts earlier this year to the possibility of another rate hike.
Fed Chairman Kevin Warsh reinforced those concerns at Jackson Hole on Friday, noting that while the labor market and economy remain healthy, inflation is still too high. His comments increased expectations for a potential September rate hike. On the positive side, Nvidia once again exceeded earnings expectations and raised its future growth outlook, providing another boost to the AI industry.
This week, investors will focus on manufacturing and services data, followed by Friday's employment report. After the economy lost 23,000 jobs in July, another weak report could signal a slowing labor market, while a strong report could give the Fed more justification to raise rates.
Have a great day and terrific week!
Source: Yahoo Finance
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