PCE Delivers Goldilocks Numbers for the Stock Market

Core Insights - The pre-market futures are rising ahead of the Personal Consumption Expenditures (PCE) report, indicating positive market sentiment [1] - The PCE Index numbers for August were in line with expectations, showing a month-over-month increase of +0.3% and a year-over-year increase of +2.7% [2][5] - Personal Income and Spending for August exceeded consensus estimates, with Personal Income at +0.4% and Personal Spending at +0.6% [2][3] Economic Indicators - "Real" Spending, adjusted for inflation, increased by +0.3% in August, indicating consumer strength but still below the year-to-date high of +0.7% [3] - Core PCE month-over-month decreased to +0.2%, while year-over-year core PCE remained at +2.9%, slightly below the previous high of +2.95% [4][5] Implications for Monetary Policy - The current PCE data suggests that while inflation is present, it is not out of control, which may influence the Federal Reserve's approach to interest rates [6][9] - The Fed is unlikely to implement significant rate cuts, as it views the current rate of 4.00-4.25% as mildly restrictive, aiming for a target inflation rate of 2% [7] Market Expectations - The stock market is expected to react positively to the PCE report, with traders optimistic about the economic indicators [1][9] - A final University of Michigan Consumer Sentiment survey is anticipated, with preliminary results showing a decline from previous months but still above earlier lows [8]