The Core Personal Consumption Expenditures over to year to March came in line at 1.9% matching consensus, almost at 2% Fed’s target.
Higher US dollar and increasing tensions in the Middle-East are not helping stocks gaining traction amid stellar earnings season.
The S&P 500 lost 8 points or 0.3% to 2,648.05 and ten of the eleven main sectors ended lower; T-Mobile will buy Sprint for $35.5 billion, however, analysts believe that the merger will have issues with federal approvals and both companies stocks fell sharply.The Dow Jones Industrial Average dropped 0.61% to 24163.15 led by Boeing while Apple is due to report its earnings after the close on Tuesday. The Nasdaq lost 0.75% to 7066.27 led by a decline in Microsoft.
Although earnings are stellar, the markets are struggling with higher rates and a stronger US dollar which had its best month (April) since November 2016.
On the macroeconomic front, the Personal Consumption Expenditures (PCE) price index printed in March its biggest year-on-year gain since February 2017. The core PCE, which excludes food and energy, rose to 1.9% in line with analysts expectation. The core PCE is the Federal Reserve’s preferred gauge of inflation and its target is set at 2%. According to analysts at NatWest Bank, the question is not whether the Fed raise three or four times in 2018 but what will happen in 2019.
On the geopolitical front oil got an intraday boost as Israel said that Iran was developing nuclear weapons in a secret location. Netanyahu revealed top-secret Iranian documents which have been confirmed by US authorities. The news comes less than two weeks before US President Trump must decide whether to pull out of the Iranian deal. Increasing tensions in the Middle East usually do not bode well for stocks.
S&P 500 daily chart