New York Stock Market Close: PCE Index Meets Expectations, Market Cautiously Optimistic Ahead of FOMC Meeting

Source: BlockMedia Original Title: [New York Stock Market Close] PCE Relief Leads to Slight Gains…FOMC Caution Remains Original Link:

Market Overview

The major indices on the New York Stock Exchange saw slight gains, closing out the session strongly. The Federal Reserve’s preferred inflation gauge—the September Personal Consumption Expenditures (PCE) Price Index—was in line with market expectations, providing relief.

On the 5th (ET), the closing figures for the main NYSE indices were as follows:

• Dow Jones Industrial Average rose 104.05 points (0.22%) to close at 47,954.99
• S&P 500 Index rose 13.28 points (0.19%) to close at 6,870.40
• Nasdaq Composite Index rose 72.99 points (0.31%) to close at 23,578.13

September PCE Price Index Supports Rate Cut Expectations

The Fed’s most closely watched inflation indicator—the September PCE Price Index—was mostly in line with market expectations, having a positive impact on stocks. The core PCE Price Index, which excludes volatile food and energy prices, rose 0.2% month-over-month, matching expectations. The overall PCE Price Index also rose 0.3% month-over-month, also in line with expectations.

Although inflation remains above the Fed’s 2% target, the market interprets the in-line PCE data as a major factor supporting a rate cut at next week’s FOMC meeting.

According to Chicago Mercantile Exchange (CME) FedWatch data, the federal funds rate futures market reflects an 87.2% probability of a 25-basis-point benchmark rate cut in December.

David Krakauer, Vice President of Portfolio Management at Mercer Advisors, stated: “With this indicator, the rate cut expected by the market next week is almost a done deal, and we can anticipate further cuts early next year.”

Market Volatility Remains Amid FOMC Caution

Despite the positive PCE results, stocks quickly expanded their gains but then retreated to flat territory, showing sharp intraday volatility.

Although a rate cut next week seems almost certain, investors appear to be waiting to confirm the FOMC meeting results (including the Summary of Economic Projections (SEP)) before determining market direction. Besides the benchmark rate cut, the Fed members’ future rate projections (“dot plot”) are expected to be a key factor for investor sentiment.

The preliminary University of Michigan Consumer Sentiment Index, which reflects confidence in the US consumer economy, came in at 53.3 (December basis), above the market expectation of 52.0, indicating some improvement in consumer sentiment.

Tech Stocks and Individual Stock Movements

By sector, Communication Services was strong, rising 0.95%, while Utilities fell 0.98%. Other sectors were mostly unchanged.

Among large-cap tech companies with a market cap over $1 trillion, Broadcom rose 2.42%, Alphabet (Google’s parent company) gained over 1%, regaining momentum.

Meta (Facebook) rose 1.80% on news of a plan to cut the metaverse division’s budget by 30%.

Salesforce continued its rise from the previous day’s strong earnings report, up 5.30%, reaching a two-year high.

On the M&A front, individual stocks saw mixed results.

Netflix fell 2.89% on news of a $72 billion acquisition of Warner Bros. Warner Bros. surged 6.28% on the acquisition news. However, with the Trump administration expressing “strong doubts” about the merger, the possibility of the deal falling through has emerged.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) fell 0.37 points (2.34%) to 15.41.