[New York Stock Market] Relief on January PCE Inflation Meeting Expectations... Nasdaq Hits All-Time High

January Core PCE Inflation Up 2.8% Year-on-Year
PCE Meets Forecast Despite Surprise CPI Increase

The three major indices of the U.S. New York stock market all closed higher on the 29th (local time). A relief rally unfolded as the January Personal Consumption Expenditures (PCE) price index increase rate matched market expectations. The tech-heavy Nasdaq index hit an all-time high.

On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average rose 47.37 points (0.12%) from the previous session to close at 38,996.39. The large-cap S&P 500 index gained 26.51 points (0.52%) to 5,096.27, and the Nasdaq index increased by 144.18 points (0.9%) to close at 16,091.92. The Nasdaq index marked its highest closing level in 2 years and 3 months since November 19, 2021 (16,057.44).

The monthly gains for February were led by the Nasdaq index at 6.12%. Following were the S&P 500 index up 5.17% and the Dow Jones up 2.22%. The Dow Jones recorded a four-month consecutive rise for the first time since May 2021.

The release of the PCE price index, the inflation indicator most closely watched by the U.S. Federal Reserve (Fed), eased investor concerns. On that day, the U.S. Department of Commerce announced that the core PCE price index, excluding energy and food, rose 0.4% month-over-month and 2.8% year-over-year in January. This was in line with market estimates and slightly lower than the 2.9% increase in December last year. The headline PCE price index rose 0.3% month-over-month and 2.4% year-over-year, also matching market expectations. Personal income growth significantly exceeded the forecast of 0.3%, recording 1%. Consumer spending, contrary to the expected 0.2% increase, decreased by 0.1%.

Given that the previously released January Consumer Price Index (CPI) and Producer Price Index (PPI) increases were larger than expected, the market was quite cautious ahead of the January PCE price index release. However, investors were relieved as the core PCE price index growth rate, which the Fed considers most important, showed a moderate slowdown last month.

Chris Zaccarelli, Chief Investment Officer (CIO) of Independent Advisor Alliance, said, "This morning's data gives a sigh of relief to bulls who feared inflation would accelerate again, delaying the Fed's rate cuts for a long time," adding, "At least today, buyers should reappear."

Market expectations for a rate cut in June are spreading. Krishna Guha, Evercore Vice Chairman, said about the January PCE report, "No new bad news was added," maintaining the forecast that the Fed will make its first rate cut in June. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on that day reflected over a 61% probability that the Fed will cut rates at the Federal Open Market Committee (FOMC) meeting in June.

Fed officials continued their remarks that day as well. The main message was that there is no immediate need to cut rates. Mary Daly, President of the Federal Reserve Bank of San Francisco, emphasized that while the Fed is ready to cut rates if necessary, the economy is still strong, so there is no urgent need for a cut. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated that based on inflation forecasts, it would be appropriate to start a more accommodative monetary policy this summer.

By individual stocks, data specialist Snowflake plunged 18.14% after CEO Frank Slootman announced his retirement and the company issued disappointing product sales forecasts. Cybersecurity firm Okta surged 22.91% on strong earnings. PC manufacturer and IT solutions company Dell rose 1.51% during regular trading and surged more than 15% in after-hours trading following strong earnings results. Dell reported fourth-quarter revenue of $22.32 billion and adjusted earnings per share (EPS) of $2.20, both exceeding market expectations. Previously, the market had expected Dell to report revenue of $22.16 billion and adjusted EPS of $1.73.

Government bond yields fell slightly. The U.S. 10-year Treasury yield, a global bond yield benchmark, declined slightly to 4.24%, and the 2-year Treasury yield, sensitive to monetary policy, also edged down to around 4.62%.

International oil prices are on a downward trend. West Texas Intermediate (WTI) crude fell $0.28 to $78.26 per barrel, and Brent crude dropped $0.06 to $83.62 per barrel.