PCE Price Index Rises 0.6%, Fed Notes Risk of Further Rate Hikes

The Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred gauge of inflation, rose 0.6% in January from the month prior, and 5.4% from the same month last year.[0] Excluding volatile food and energy components, core prices increased by 0.6% for the month and 4.7% from the previous year.[1] Additionally, January’s personal spending increased 1.1%, its biggest advance since March 2021.[2]

The minutes from the Fed’s January 31 and February 1 meeting showed that while there were signs of inflation easing, central bank officials were still concerned about rising prices.[3] Investors sought safety on Thursday after it was noted that further interest rate hikes are likely, causing yields to drop.[4]

Data released on Friday showed that personal income rose 1.2% in January, while consumer spending increased 1.4%.[5] The University of Michigan consumer sentiment index came in at 66.4, unchanged from the mid-month flash reading.[6]

Oil prices rose 0.9%, supported by prospects of reduced supply from Russia, but a weekly build in US crude stockpiles limited the upside potential.[6]

Meanwhile, the stock market saw declines on Friday, with the Nasdaq Composite (COMP.IND) finishing 0.1% lower, the S&P 500 (SP500) ending down 0.2%, and the Dow (DJI) closing 0.3% lower.[5] The 10-year U.S. Treasury yield ticked lower to 3.87% Thursday, falling for a second-straight session, but moved higher to 3.94% Friday morning.[7]

Shares of Dow component Boeing Co. (BA) fell 4.5% as the airplane maker halted deliveries of the 787 Dreamliner.[8] The Federal Aviation Administration said deliveries were temporarily halted as Boeing is conducting additional analysis on a fuselage component.[8]

Cleveland Fed President Loretta Mester said a bigger-than-expected rise in the central bank’s preferred inflation gauge shows the need to keep raising rates.[0] On Wednesday, James Bullard, President of the Federal Reserve Bank of St. Louis, who is not part of the FOMC voting committee this year but is a prominent hawk, suggested that the Fed’s target rate might need to be increased from the current 4.5% – 4.75% to between 5.25% and 5.5%.[9]

0. “Tech Crushed as Bond Yields Climb on Hot Inflation: Markets Wrap” Yahoo! Voices, 24 Feb. 2023, https://www.yahoo.com/now/asia-stocks-open-mixed-bumpy-224011362.html

1. “Stock market news today: Stocks slide after hotter-than-expected key inflation print” Yahoo News, 24 Feb. 2023, https://news.yahoo.com/stock-market-news-today-february-24-2023-104349492.html

2. “Markets Today: Stock Indexes Fall as PCE Inflation Accelerates” Barchart, 24 Feb. 2023, https://www.barchart.com/story/news/14522916/markets-today-stock-indexes-fall-as-pce-inflation-accelerates

3. “S&P 500, Dow slide again after another hawkish signal from Fed; Nasdaq posts gain” Seeking Alpha, 22 Feb. 2023, https://seekingalpha.com/news/3939382-sp-500-dow-slide-again-after-another-hawkish-signal-from-fed-nasdaq-posts-gain

4. “Treasury yields dip as investors assess Fed policy outlook” CNBC, 23 Feb. 2023, https://www.cnbc.com/2023/02/23/us-treasury-yields-investors-assess-fed-policy-outlook.html

5. “Stock Market News Today: Stocks in the Red after Hot Inflation Report” TipRanks, 24 Feb. 2023, https://www.tipranks.com/news/stock-market-news-today-futures-trend-down-ahead-of-key-economic-data

6. “PCE Inflation Outlook Fuels Premarket Losses for US Equity Futures” msnNOW, 24 Feb. 2023, https://www.msn.com/en-us/money/markets/pce-inflation-outlook-fuels-premarket-losses-for-us-equity-futures/ar-AA17TcYf

7. “Dow Jones Dives 400 Points On Hot Inflation Report; Tesla Stock Skids” Investor’s Business Daily, 24 Feb. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-fall-200-points-ahead-of-key-inflation-report/

8. “Dow falls more than 300 points after Fed’s favorite inflation gauge runs hotter than expected” MarketWatch, 24 Feb. 2023, https://www.marketwatch.com/story/u-s-stock-futures-weaken-ahead-of-key-inflation-data-efb982a2

9. “So Long, Losing Streak? Stocks, Yields Climb as Market Mulls Fed Minutes, Hot Jobs Data, GDP – Ticker Tape” The Ticker Tape, 23 Feb. 2023, https://tickertape.tdameritrade.com/market-news/so-long-losing-streak-stocks-yields-climb-as-market-mulls-fed-minutes-hot-jobs-data-gdp-19400