US Futures Dip With Focus on Key Inflation Data: Markets Wrap

U.S. Financial Markets Respond to Inflation Data

Treasuries and Dollar Movement
Treasuries advanced while the dollar retreated as the Federal Reserve's preferred inflation gauge indicated potential for rate cuts, impacting bond yields and currency values.

Wall Street's Interpretation
Financial experts provided mixed reactions to the inflation data, with some viewing it as a positive step towards disinflation, while others felt it was insufficient for immediate policy changes.

Corporate Performance Highlights
Companies like Nordstrom and Dell Technologies reported varied financial results, influencing stock movements and investor sentiments.

Global Market Impacts
The inflation data had broader implications, affecting not only U.S. markets but also international stocks and commodities, reflecting a cautious but hopeful outlook.

Wall Street analysts interpreted the latest inflation and consumer spending data in relation to future Federal Reserve actions as follows:

1. Bret Kenwell at eToro: Softening retail spending should help stoke the flames for lower rates in the second half of 2024.
2. Stan Shipley at Evercore: Today's reports are essentially favorable for lower Treasury yields and the dollar as the inflation data was favorable, and real spending growth was in negative territory.
3. Scott Helfstein at Global X: The numbers came in exactly as expected. A data-dependent Fed probably does not learn much the past two days. But the markets continue reducing expectations for rate cuts on economic strength.
4. David Russell at TradeStation: Investors have been hoping that the bout of inflation we saw early in the year would fade, and that seems to be playing out. The PCE data confirms price increases aren't as sticky as feared, keeping hopes of at least one rate cut on the table.
5. Sonu Varghese at Carson Group: April PCE data was a welcome relief after a string of hotter than expected inflation data in Q1, with headline and core inflation coming in as expected. The overall inflation outlook looks good, with disinflation in the pipeline, and that likely keeps the Fed on track to cut twice this year starting in September.
6. Peter Boockvar at The Boock Report: Yields fell in response to the PCE data only because there was no surprise with the data in line. Maybe too with the slightly less than expected spending figure as REAL spending was down a touch.
7. Jeff Roach at LPL Financial: Consumer spending in the first month of the new quarter slowed as real disposable incomes fell. Businesses need to prepare for an environment where consumers are not splurging like they were last year. Overall, the Fed will want more clarity on the inflation front. This inflation update will likely keep the Fed on hold in the near term.
8. Paul Ashworth, Chief North America Economist: The PCE deflator data suggest that, although not quite as bad as the first three months of the year, inflation was still running above target in April. At the same time, however, the real spending data suggest that second-quarter consumption growth could be weaker than we previously expected.
9. Chris Larkin at E*Trade from Morgan Stanley: The PCE Price Index didn't show much progress on inflation — but it didn't show any backsliding, either. Investors will have to remain patient, though. The Fed has suggested it will take more than one month of favorable data to confirm inflation is reliably moving lower again, so there's still no reason to think a first rate cut will come any earlier than September.
10. Chris Zaccarelli at Independent Advisor Alliance: The market has spent this year worried about inflation and there was a sigh of relief this morning when it wasn't higher than expected. We are in a be-careful-what-you-wish-for moment because if slowing consumer spending leads to lower inflation and the Fed is able to cut slowly as a result then that will be good for markets.
11. Larry Tentarelli at Blue Chip Daily Trend Report: We view today's April PCE inflation report as slightly constructive. We do believe that there is a Fed put back in place if for some reason the Fed over tightens and creates a sharp slowdown in the economy.

Overall, analysts seem to believe that the latest inflation data and consumer spending reports suggest that the Federal Reserve may have room to cut rates in the future, although more clarity on inflation is needed. They also note that softening consumer spending could help drive lower rates, but warn that a too-rapid slowdown in spending and the economy could negatively impact corporate profits and stock prices.