US stocks near record highs as PCE comes in lower than expected

Summary:

• S&P500 pressing against record high

• Fed’s preferred inflation measure drops

• Target gains on broker upgrade

After a rip higher at the end of Friday’s session that saw the S&P500 close at a record high, US stocks are set to begin not far from that level this afternoon. The intraday high of 2946.7 from September last year remains in tact for now but it wouldn’t take much more upside for the market to rally into uncharted territory. As is often the case with stock market rallies there are numerous reasons why equities should be lower, but the most important takeaway for now is that they are not and in the absence of any reversal patterns or major negative catalysts the path of least resistance appears to the upside.

The S&P500 came within a whisker of its all-time intraday high of 2946.7 on Friday and this is a level to keep an eye on for the forthcoming session. The region from 2914-2921 remains potential support. Source: xStation

It’s a busy week on the economic calendar with Wednesday’s Fed meeting and Friday’s NFPs the two standout events, but the PMI data from both the US and China shouldn’t be overlooked in terms of their importance - the first of two Chinese PMIs in the coming days will be released overnight. Before that however, this afternoon we’ve had the latest look at price pressures with the Fed’s preferred inflation measure coming in lower than forecast. For March the core PCE Y/Y fell to +1.6% compared to +1.7% expected, down from the prior month’s reading of +1.7% - a reading that itself was revised lower from 1.8%. This data supports Friday’s GDP release in suggesting that price pressures in the US are waning slightly and there’s very little in them that would weigh on the mind of rate-setters in terms of forcing them to consider raising rates when the Fed begin their 2-day meeting tomorrow.     

Both the PCE and PCE Core have pulled back in recent months and these remain below the 2% inflation target. Source: XTB Macrobond

As far as shares go, Target is set for a bright start on the open, with the retailer called to begin almost 3% higher after a broker upgrade. An analyst at Barclays upgraded the stock to “overweight” from “equal weight” noting that the company leads Amazon in same-day deliveries and “has built a supply chain that fulfills e-commerce primarily from stores (where next-day delivery is much easier), which stands in a stark contrast to most retailers.” The comments will be warmly welcomed by investors after Friday’s trade saw the stock tumble after news broke that Amazon was planning to reduce delivery times for top customers to one day from two.  

Shares in Target are called to open higher this afternoon after the retailer received a broker upgrade. Friday has seen the stock tumble as news broke that Amazon was moving to shorten its delivery time. Source: xStation