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The S&P 500 came within a whisker of setting a new all-time high yesterday. It couldn't quite get there, however. That won't be the case at today's open if the current indication in the equity futures market is sustained.
The S&P 500 futures are up 15 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 66 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 136 points and are trading 0.4% above fair value.
This upside bias has been aided by the magnetic appeal of setting a new all-time high, as well as some encouraging-sounding updates on the trade front. Specifically, the U.S. and China confirmed the details of the trade framework agreement reached in London that is expected to improve China's approval of rare earth exports and relax the U.S.'s restrictions on technology exports to China; meanwhile, Commerce Secretary Lutnick has indicated that deals with 10 trading partners are imminent, according to Bloomberg.
This news and an 11% jump in Dow component Nike (NKE), which some think has reached an inflection point with its turnaround effort following an otherwise weak earnings report, have been an offset to a disappointing Personal Income and Spending Report for May.
Personal income declined 0.4% month-over-month in May (Briefing.com consensus +0.4%) following a downwardly revised 0.7% increase (from 0.8%) in April. Personal spending declined 0.1% (Briefing.com consensus +0.2%) following a 0.2% increase in April. Real personal spending declined 0.3%, which will be a drag on Q2 GDP forecasts.
The PCE Price Index increased 0.1% month-over-month, as expected, but the core-PCE Price Index jumped 0.2% month-over-month, which was higher than expected (Briefing.com consensus 0.1%). Those moves left the PCE Price Index up 2.3% year-over-year, versus 2.2% in April, and the core-PCE Price Index up 2.7% year-over-year, versus 2.6% in April.
The key takeaway from the report is that it has a stagflation aura about it, meaning it is a poor report for the growth outlook and a poor report for the inflation trend. That leaves the Fed between a rock and a hard policy place, yet given the Fed's attention to inflation concerns at this juncture, it seems like a report that will keep the Fed reluctant to cut rates at its July FOMC meeting.
