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There wasn't much to be said for yesterday's rebound effort. It was weak with buyers losing conviction as the 10-yr note yield continued to rise, hitting 4.59% at one point before settling at 4.57%. Their conviction is still lacking heading into this quarterly options/futures expiration day, which will also include an S&P 500 and Nasdaq 100 rebalancing at the close.
Currently, the S&P 500 futures are down 32 points and are trading 0.5% below fair value, the Nasdaq 100 futures are down 172 points and are trading 0.8% below fair value, and the Dow Jones Industrial Average futures are down 78 points and are trading 0.3% below fair value.
How much of this weakness is tied up in expiration activity is difficult to determine, yet it has not been difficult to determine that the stock market hit a wall Wednesday after the Fed implied with its words and guidance that further rate cuts can wait until there is more progress on inflation.
The inflation goal is 2.0%, and while a good bit of progress has been made moving toward that goal, the data itself continue to reveal that there has been a stalling in that progress. We can see that again this morning following the release of the November Personal Income and Spending Report.
Briefly, personal income increased 0.3% month-over-month (Briefing.com consensus 0.4%) following an upwardly revised 0.7% (from 0.6%) in October. Personal spending rose 0.4% month-over-month (Briefing.com consensus 0.5%) following a downwardly revised 0.3% increase (from 0.4%) in October.
The PCE Price Index was up 0.1% month-over-month (Briefing.com consensus 0.2%); however, it ticked up to 2.4% year-over-year from 2.3% in October. The core-PCE Price Index, which excludes food and energy, also increased 0.1% month-over-month and held steady at 2.8% year-over-year.
The key takeaway from the report is that there wasn't any improvement in the year-over-year readings for PCE and core-PCE inflation.
The latter point notwithstanding, the Treasury market took some solace in the softer month-over-month readings, and that has proven to be a big help for the equity futures market, which had been much lower prior to the release. The 2-yr note yield is down six basis points to 4.26% and the inflation-sensitive 10-yr note yield is down seven basis points to 4.50%.
Yields had been moving lower in the overnight trade, driven by some safe-haven trading that stemmed from the ongoing weakness in the stock market and heightened political uncertainty after a government funding bill and provision to suspend the debt ceiling until January 2027, which had been endorsed by President-elect Trump, failed in the House with 38 GOP members voting against it.
Reportedly, there will be another vote this morning on what Speaker Johnson (R-LA) calls "Plan C" to try to avoid a government shutdown after midnight.
That will leave the stock market "playing some politics" as it also plays with the earnings news and guidance from Dow component Nike (NKE), which is down 5.5%, and FedEx (FDX), which is up 8.3%.
