Stocks end week higher as Dow leads gains
Stocks in the United States (US) closed the week on a high note, with the Dow Jones leading the gains as investors continued to focus on cyclical stocks likely to benefit from a resilient economy. However, caution lingered in the tech sector following Nvidia‘s mixed earnings report.
Trump announces US Treasury secretary
In political news, President-elect Donald Trump has announced his nomination of Scott Bessent as the new US Treasury secretary.
Markets are expected to welcome Bessent’s appointment, given his track record working with hedge fund legends such as George Soros and Stanley Druckenmiller. Bessent has previously expressed a preference for tariffs to be introduced gradually.
Focus shifts to Fed minutes and inflation data
In a Thanksgiving holiday-shortened week, market attention will centre on the Federal Open Market Committee (FOMC) meeting minutes and the Fed’s preferred measure of inflation, the core personal consumption expenditures (PCE) price index.
US equities have significantly outperformed this month, leading asset allocators and pension funds to prepare for potential month-end rebalancing flows. These flows may be postponed until after Trump’s inauguration, as investors await clarity on his policies.
What the core PCE inflation report could mean for markets
Date: Thursday, 28 November at 12.30am AEDT
In September, headline PCE rose 2.1% year-on-year (YoY), slowing from a 2.3% increase in August. Meanwhile, core PCE, which excludes volatile food and energy prices, rose by 2.7% YoY, exceeding forecasts of 2.6%. This marked the first uptick in core PCE since August 2023.
For October, core PCE inflation is expected to rise 0.3% month-on-month (MoM), lifting the annual rate to 2.8% from 2.7%. This increase may fuel concerns over limited progress in curbing inflation, potentially impacting market expectations for future Federal Reserve (Fed) ineterst rate cuts.
Despite the uptick, goods inflation is expected to remain subdued, while shelter inflation is likely to continue moderating. With the labour market recovering beyond pre Covid-19 levels, wage growth is expected to fall below 3.5%, which could ease pressure on core services inflation over time.
