Stock Market Update

The S&P 500 futures are up 36 points and are trading 0.7% above fair value, the Nasdaq 100 futures are up 171 points and are trading 0.9% above fair value, and the Dow Jones Industrial Average futures are up 212 points and are trading 0.6% above fair value.

Personal income increased 0.2% month-over-month in June (Briefing.com consensus 0.4%) following a downwardly revised 0.4% increase (from 0.5%) in May. Personal spending increased 0.3% month-over-month (Briefing.com consensus 0.3%).

The PCE Price Index was up 0.1% month-over-month and the core-PCE Price Index, which excludes food and energy, was up 0.2%. Both were in-line with expectations. Those increases left the PCE Price Index up 2.5% year-over-year, versus 2.6% in May, and the core-PCE Price Index up 2.6% year-over-year, unchanged from May.

The key takeaway from the report is that the price indexes didn't worsen on a year-over-year basis (i.e., move higher relative to the prior month). Consequently, they didn't give the market any reason to think the Fed will not cut rates at its September FOMC meeting considering comments from Fed officials, who knew where the May PCE price readings stood, have been teeing up that possibility.

Treasury yields turned lower in response. The 2-yr note yield, which is most sensitive to changes in the fed funds rate, moved from 4.45% to 4.39%. The 10-yr note yield moved from 4.25% to 4.21%.