Newscasts - Trading at Noon: PCE reading bolsters rate cut case

Magnificent Hotel Investments

26/07/2024 17:00

Click the following link to watch video: https://share.newscasts.refinitiv.com/link?entryId=1_84evycyl&referenceId=1_84evycyl&pageId=Newscasts
Source: 'Reuters - Business videos'

Description: Friday's PCE Price Index further raised hopes of a September cut
to interest rates, while equity markets rebounded following Wednesday's
wipeout in the tech sector.
Short Link: https://refini.tv/3LKHhFO

Video Transcript:

Steady inflation reading bolsters the case for a September rate cut. Welcome
to Trading at Noon. I'm Thomas Warner. US prices increased moderately in June
this as the decline in the cost of goods tempered a rise in the cost of
services. The personal consumption price index nudged up 0.1% last month,
after being unchanged in May. In the 12 months to June, prices rose 2.5% while
core prices rose more than expected. A separate report showing consumer
spending slowed last month up 0.3% compared with 0.4% the month before. Signs
of easing price pressures and cooling spending could give the Fed the leeway
that it needs to cut rates.

I think the call for interest rate cuts has been intensified in the recent
week. First of all, given that economic data has generally been slowing down,
particularly in the labor market. And obviously, the rout that is happening in
the equity market that effectively tightens financial conditions. So, I think
there are more calls for a rate cut and I think this is a Federal Reserve that
has been leaning on a rate cut anyway. So, I think analysts are pretty much
pricing in a rate cut in September, but not just as soon as the meeting next
week.

Interest rate sensitive two year note yields were down after the release of
the inflation data dropping 6 basis points to 4.386%. They were down as low as
4.34% on Thursday as the lowest since February, the second before rising
slightly on that strong Q2 GDP growth number yesterday. Turning to the equity
markets now and Wall Street bounced back on Friday as megacap tech and chip
stocks recovered from the week's pummeling. Hopes for that September cut
lifted equities across the board including the domestic focus Russell 2000,
which hit a one week high. Tech stocks led the recovery on the major indexes,
but the so-called Magnificent Seven stocks were mixed in early trading. Q2
earnings season continued this morning. Shares in three M were up more than
13% at last check after the industrial conglomerate raised the lower end of
its profit forecast. It's been through a major restructure that's included a
10% cut to its global workforce. And shares in Colgate-Palmolive also traded
higher on a guidance lift. The toothpaste maker beat Q2 estimates and sees
annual profit and revenue coming in above forecast on resilient demand for
premium products, particularly from South America. Drug maker Bristol Myers
Squibb was up 8% after posting better than expected second quarter results.
Investors appeared convinced by what CFO David Elkins calls the company's
growth portfolio. Sales of that basket of top performers rose 18% on the year.
Brent and WTI were both down more than a dollar at last check, trading at $81
and $77 a barrel respectively. They're both on track for their third weekly
decline hit by concern about future demand from China. And that is Trading at
Noon