Stock Market Update

[BRIEFING.COM] The stock market is in rally-mode after declines this week. The S&P 500 sports a 1.9% gain, leaving the index 1.2% lower than last Friday. The Nasdaq Composite trades 1.8% higher than yesterday and the Dow Jones Industrial Average is roughly 800 points higher. 

Equities have been energized by the price action in Treasuries, which follows the release of the Personal Income and Spending Report for November. 

This morning's inflation readings didn't show any improvement, but importantly, the data was better than consensus estimates. The PCE Price Index rose to 2.4% on a year-over-year basis versus 2.3% in October, and core PCE was 2.8%, which was unchanged from October. Expectations however, pegged them coming in at 2.5% and 2.9%, respectively.

The 10-yr yield is down eight basis points to 4.49% and the 2-yr yield is down three basis points to 4.29%.

Just about everything in the stock market has benefitted from buying interest. The equal-weighted S&P 500 is 1.8% higher; all 11 S&P 500 sectors trade up; and 27 of the 30 Dow components are higher.

NIKE (NKE 76.79, -0.31, -0.4%) has gone against the grain, underperforming after disappointing with its fiscal Q3 revenue guidance.

Other names that reported earnings since yesterday's close have garnered positive response. FedEx (FDX 279.44, +3.56, +1.3%) and Carnival Corp. (CCL 26.37, +1.19, +4.7%) are standouts in that respect.

Reviewing today's economic data:

• Personal income increased 0.3% month-over-month in November (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 final University of Michigan Index of Consumer Sentiment for December held steady at 74.0 (Briefing.com consensus 74.2) from the preliminary reading. In the same period a year ago, the index stood at 69.7.
  • The key takeaway from the report is the understanding that consumers are expecting future price increases for large purchases, which is driving a pickup in current buying conditions.