Benzinga
Published Jun 29, 2023 17:18
Updated Jun 29, 2023 18:40
Friday Showdown: Markets Brace For Fed's Preferred Inflation Data While July Interest Rate Hike Bets Surge
Benzinga - The Federal Reserve’s preferred measure of inflation, the personal consumption expenditure (PCE) price index for the month of May, will be released Friday.
Investors are on edge as they eagerly anticipate the unveiling of the PCE inflation figures following a sudden shift in sentiment caused by a surprisingly hawkish Fed Chair Jerome Powell and robust economic indicators this week.
As we approach this data release, investors have already upped their bets on a 25-basis-point hike by the Fed in July, placing an 87% probability, according to the latest CME Group FedWatch Tool. Speculators are also increasing their bets on a possible back-to-back hike in September, assigning a 24% probability to this outcome.
On the other hand, markets could immediately react to a lower-than-expected reading by lowering some pressure on a September hike. Yet as the Fed has signaled at least two rate hikes coing in 2023, possibly beginning at the next meeting, even a lower-than-expected PCE reading is unlikely to significantly alter expectations for July.
Even if PCE is in line with expectations, hawkish reactions to the release are still possible in case core PCE remains unchanged, or tilts higher.
That scenario would suggest overall PCE inflation has been lowered by the prices of volatile products like food and energy, while the core inflation rate has remained elevated due to the sticky, high cost of services.
Despite PCE data that came in higher than expected, stocks rallied sharply on the back of artificial intelligence and rising hopes for a debt ceiling deal in the United States.
The Nasdaq 100 Index, as tracked by the Invesco QQQ Trust (NASDAQ:QQQ), rallied 2.6%. The best performer of the day was Marvell Technology Inc. (NASDAQ:MRVL) up 32%, followed by PDD Holdings (NASDAQ:PDD), up 19% and Broadcom Inc. (NASDAQ:AVGO), up 11.5%.
The S&P 500 Index, as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), also rose 1.3%. The best performers among S&P 500 heavyweights were Tesla Inc. (NASDAQ:TSLA), up 4.7%, Amazon Inc. (NASDAQ: AMZN, up 4.4%, and American Express Company (NYSE: AXP), up 4.1%.
Read now: President’s ‘Bidenomics’ Agenda Takes Center Stage In Chicago Address Today: Jobs, Inflation And Investments In Focus
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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