PCE index rises by 2.5 percent
Wall Street is heading into the long weekend stronger
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The consumer price index, which is important for the US Federal Reserve, is strengthening hopes on Wall Street that the interest rate turnaround will begin in September. Analysts are betting on a cut of 50 basis points. The indices ended the week clearly in positive territory.
The US stock exchanges closed with surcharges in the evening. After a cautious trading session, the indices only rose significantly in late trading. The Dow Jones Index closed 0.6 percent higher at 41,563 points. The S&P 500 rose by 1.0 percent, during the Nasdaq Composite increased by 1.1 percent. There were a total of 1,787 (Thursday: 1,909) price winners and 1,017 (858) losers. 65 (97) titles closed unchanged. There will be no trading in the USA on Monday due to Labor Day.
The topic of discussion was the new US inflation data. These were largely in line with expectations. The PCE price index for consumer spending, favored by the US Federal Reserve, increased in July, as in the previous month, by 2.5 percent compared to the previous year. The Fed aims for an inflation rate of 2 percent. In a month-on-month comparison, the index increased by 0.2 (0.1) percent in July. In the core rate excluding the food and energy components, the index rose by 2.5 (2.6) percent on an annual basis and 0.2 (0.2) percent on a monthly basis. Economists had expected rates of 2.7 and 0.2 percent. US consumers increased their spending moderately. An increase of 0.3 percent was reported for income. Economists had expected an increase of 0.2 percent.
Overall, the market reaction to the data was cautious. Nigel Green from asset manager deVere believes the door is wide open for a major interest rate hike of 50 basis points in September. “The PCE data shows a sustained trend of disinflation,” he said, referring to developments in July. Whether it will be a cut of 25 or even 50 basis points will probably only be decided with the US labor market data next week. The mood of purchasing managers in the Chicago area brightened more than expected in August. The University of Michigan's consumer sentiment index also improved for August.
Dollar firmer after data – oil prices fall
On Foreign exchange market The dollar was firmer after the data. The dollar index rose 0.3 percent. The Fed's “doves” who favor rate cuts are more interested in labor market data than inflation numbers, said Ipek Ozkardeskaya, an analyst at Swissquote Bank. What would really change the game would be strong labor market data next week, the participant added.
The Oil prices gave way significantly. Prices for WTI and Brent fell by up to 3.1 percent. OPEC and its allies reportedly plan to begin reversing production cuts in October. The background is the loss of Libyan production and the expectation that the US Federal Reserve will begin cutting interest rates in September.
On Bond market Yields continued their upward move following the inflation data. The yield on ten-year papers increased by 5.6 basis points to 3.92 percent. The Gold price fell again after the previous day's significant increases. Market participants referred to profit-taking. The price of the troy ounce fell by 0.7 percent.
Dell shares according to numbers with premiums – Intel with a price jump
Dell Technologies reported higher sales and profits in the second quarter as demand for artificial intelligence servers rose sharply. The share price rose by 4.4 percent. Intel (+9.6%) strategic changes and austerity measures could be on the horizon. The US chip company is examining various options for its business before the upcoming board meeting in September, the Bloomberg news agency reported, citing unnamed circles. Among other things, it is being discussed whether plans for new plants could be canceled. A possible spin-off of the product design and production business is also being discussed, it said.
Cisco Systems (+0.3%) has lost a patent rights lawsuit after a preliminary ruling and is expected to pay Paltalk Holdings $65.7 million.
Goldman Sachs plans to lay off more than 1,300 employees as part of an annual review process to weed out underperforming employees, according to people familiar with the matter. The bank will likely cut between 3 and 4 percent of its workforce, the people said. The shares closed little changed.
Lululemon Athletica (+0.2%) is struggling with a further slowdown in its business. The sportswear maker lowered its full-year outlook. In the second quarter, however, the group exceeded profit expectations. For the titles of Marvell Technology it rose sharply by 9.2 percent. The maker of memory, telecommunications and semiconductor products gave a strong outlook for the current quarter.
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