US futures
Dow futures -0.01%, S&P futures -0.3% & Nasdaq futures -0.65%
In Europe
FTSE -0.01% & -DAX 0.10%
US core PCE rose to 2.9%, as expectced
Fed rate cut expectations are unchanged
Dell Technologies drops after earnings
Oil gains across the week
US Core PCE rises as expected to 2.9% YoY
US stocks are falling back from record levels as investors digest an in-line with expectations rise in core PCE, the Federal Reserve's preferred gauge for inflation, and Trump’s end to the de minimis exemption.
Core PCE rose to 2.9% year on year in July, reaching its highest level in five months, up from 2.8% in June. The data provides further evidence that President Trump's sweeping tariffs are being passed on to consumer prices, coming after an upside surprise in PPI inflation. However, the market reaction has been muted, likely due to Powell’s dovish stance at the Jackson Hole conference.
Expectations for a September rate cut grew sharply following Federal Reserve chair Jerome Powell's speech at Jackson Hole, where he acknowledged the recent cooling in the labour market. However, he still cited uncertainty over the inflationary impact of trade tariffs.
Yesterday, Federal Reserve Governor Christopher Waller said that he wants to start cutting rates next month and fully expects more rate cuts to follow.
Separately, the Trump administration ended the US duty-free imports and packages worth less than $800 in the so-called de minimis, which has fueled a surge in shipments. This is likely to increase the prices of shipments, mainly from China, adding to inflationary pressures.
Major indices posted gains on Thursday, with the S&P 500 closing up 0.3% at a record high. Dow Jones also posted a new record. The three main indices are on track for solid monthly gains, with the Dow up 3.4% in August, the S&P 500 up 2.6%, and the tech-heavy NASDAQ gaining 2.8%.
Corporate news
Dell Technologies is falling over 5% after the tech giant's quarterly profit forecast disappointed, and following a week than expected Q2 margin, which overshadowed encouraging full-year estimates.
Caterpillar is down by 3% after the heavy equipment maker forecast higher tariff-related expenses for this year, as companies scrambled to assess the impact of the shift in U.S. trade policy.
Alibaba ADR's are rising over 3% after the Chinese online marketplace posted solid gains in its cloud computing business, even as it missed market estimates for quarterly revenue.
Ultra Beauty is rising over 3% after raising its annual sales and profit guidance, following its beat of South's estimates, which I expected to be steady demand for makeup and skincare brands.
Nasdaq 100 forecast – technical analysis
The Nasdaq 100 trades within a rising channel dating back to early May. The price recently found support on the 50 SMA and the lower band of the channel, recovering higher. However, the RSI suggests that bullish momentum has been fading. Buyers failed to retake the midpoint of the channel. Support is at 23k, the 50 SMA and lower band of the rising channel. A break below here creates a lower low. Should momentum pick up, buyers will look towards 24k and fresh record highs.
FX markets – USD rises, EUR/USD falls
The USD is rising and is set for a weekly gain as investors digest the Fed's preferred gauge for inflation, which left Fed rate cut bets unchanged and the market pricing in 55 basis points of cuts by the end of the year.
The EUR/USD is falling after weaker-than-expected German retail sales data, which showed that sales fell 1.5% month-over-month, more than the 0.4% expected. The data comes after German consumer confidence figures earlier this week highlighted deteriorating sentiment. German inflation came in at 2.1% in line with forecasts.
The GBP/USD is falling. Fiscal worries in the UK mount after the Institute for Public Policy Research added full tax on banks' profits from reserves held at the Bank of England. Despite today's fall, the pound is still set for a 2% rise against the US dollar this month, boosted by strong unexpected UK data and reduced expectations of BOE rate cuts this year.
Oil slips after rising 1% yesterday
Oil prices are inching higher for a third straight day and on track to rise 1% across the week, as investors weigh up uncertainty surrounding Russian supply and expectations of lower demand as the US driving season comes to an end.
The market is also shifting its attention towards next week's OPEC+ meeting, as the group has recently accelerated output hikes to regain market share, which is pressuring the supply outlook and pulling global oil prices.
Oil prices have also been supported this week by Ukrainian attacks on Russian oil export terminals and data showing that US crude inventories are larger than expected draws, implying that summer demand may be ahead of Labor Day, the official end of the driving season.
