US Economy Surges Ahead with June PCE Numbers Shattering Expectations
Markets Show Steady Gains in Pre-Market Trading Despite Slightly Lower Russell 2000
Pre-market futures are trending upward, with the Dow up +115 points, the S&P 500 +60, and the Nasdaq experiencing a strong gain of +320 points. Meanwhile, the small-cap Russell 2000 index is trading down by half of one percent. This morning’s economic data is being met with moderate optimism, as indicated by the steady upward trajectory of futures.
The Personal Consumption Expenditures (PCE) report for June saw an increase in personal income last month to +0.3%, outpacing expectations by 10 basis points (bps). However, personal spending fell short of expectations, coming in at +0.2% – a revision down from the prior month’s figure of +0.3%. The overall PCE Index, stripping away volatile food and energy expenditures, also came in-line with expectations at +0.3%, while core PCE print was flat, following an unchanged figure of +0.2% previously.
The monthly results were particularly significant given the year-over-year figures, as they reached a high of +2.6%, significantly higher than anticipated +2.5%. Core PCE continued its highest level in over two years, coming in at +2.8%, and exceeding February’s previous record of 2.9%.
The steady climb of these economic indicators does not suggest uncontrolled inflation but rather may signal the stability needed to reach the Fed’s preferred inflation target of +2.0%. Notably, mid-year data from September 2022 had placed inflation on a deceleration track before slowing its pace in early 2023 and since – resulting in being flat-lined just over half a point above the desired Fed rate.
This morning also saw Initial Jobless Claims rising by a slight +1K to 218K. With continuing claims leveling off, the current trend indicates that unemployment claims are returning to early 2025 levels after reaching as high as 250K earlier this month. However, the future is still uncertain, and tomorrow’s Employment Situation report for July will provide valuable insight into near-term job market performance.
Key Earnings Announcements Make Waves in Markets
Among notable earnings releases today, AbbVie outperformed estimates with Q2 results of $2.97 per share, representing a 4% advance in pre-market trading and +6.5% year to date. CVS Health produced an equally impressive performance by reaching $1.81 per share – beating expectations by 23.13%. The stock is currently trading at +8% above the opening bell price.
Mastercard was another earnings standout, surpassing consensus mark of $4.05 with actual results of $4.15. Additionally, Bristol Myers-Squibb reported a remarkable increase to $1.46 per share – representing a +36.45% beat on projections. This unexpected jump has led the stock price to rise by 3% during pre-market hours.
However, not all announcements were met with enthusiasm this morning as International Paper fell short of expectations and experienced downward movement in its shares by over 6%. Sirius XM Holdings also missed earnings estimates resulting in their stock trading flat so far today.
In other business-related news, a Chicago Business Barometer (PMI) report is set to be released after the opening bell. Companies like Apple, Amazon, Roku, as well as several others will share Q2 results following close market hours and are expected to bring modest gains and strong growth numbers for some of these companies.
The anticipation builds ahead of this afternoon’s major stock market announcements that analysts expect Apple to report a moderate profit while Amazon aims to post high single-digit growth percentages. This, among other upcoming reports, offers an insightful glimpse into how specific top-tier businesses have navigated the pandemic and what may be in store for investors moving forward.
With markets now brimming with anticipation for later today’s significant announcements from these influential businesses, tomorrow promises a much-anticipated outcome as investors eagerly await the Employment Situation report, further validating the trajectory that both large-cap stocks and personal consumption will take for months to come.
