Stocks Up Again, All Eyes On This Morning's PCE Inflation Report  Image: Bigstock Stocks closed higher again yesterday making it 4 days in a row for the major indexes. Tech led the way once again. We had a full day of economic reports yesterday. MBA Mortgage Applications rose 2.3% w/w, with purchases up 2.0%, and refi's up 2.5%. Pending Home Sales rose 0.9% m/m vs. last month's upwardly revised 0.4% (from 0.3%), and views for -0.4%. The index rose to 77.6 vs. last month's 76.9. The ADP Employment Report came in lighter than expected with 177,000 new private sector jobs last month vs. the consensus for 200,000. It should also be noted that they upwardly revised last month's number to 371K vs. their previously published number of 324K. The second estimate of Q2 GDP came in at 2.1% vs. last month's first estimate of 2.4% and views for the same. We'll get the third and final estimate next month. The International Trade in Goods report showed our goods deficit increased to -$91.2B vs. last month's -$88.8B and views for -$90.8B, with imports up 1.9%, while exports were up 1.5%. Retail Inventories rose 0.3% m/m vs. last month's 0.5%, while Wholesale Inventories slipped -0.1% vs. last month's -0.7%. Corporate Profits declined by -9.4% y/y (after tax) vs. last month's -5.1% pace. With Inventory and Consumption adjustments, that came in at -6.2% vs. last month's pace of -1.9%. The Survey of Business Uncertainty showed U.S. firms expect the year-ahead sales growth to be 4.15% vs. last month's estimate of 4.31%, and the year-ahead employment growth to be 4.29% vs. last month's expectation for 4.40%. And the State Street Investor Confidence Index jumped by 11.4 points to 107.7 vs. last month's 96.3. North America saw the biggest increase with a 12.9 point gain to 103.8. The Asian component was up 4.8 points at 102.2. And Europe was up 4.3 points at 103.7. Today we'll get the Challenger Job-Cut Report, Weekly Jobless Claims, the Chicago PMI, and the report everybody's been waiting for which is the Personal Consumption Expenditures (PCE) Index. The PCE Index is the Fed's preferred inflation gauge. Last month's report showed continued easing with the headline rate coming in at 3.0% y/y vs. the previous month's 3.8%. And the core rate (ex-food & energy) declining to 4.1% y/y vs. the previous month's 4.6%. But the CPI and PPI inflation reports earlier this month were a mixed bag in that the CPI came in slightly better than expected while the PPI came in slightly worse than expected. If today's PCE report can show a meaningful decline, or at least rise less than expected (the consensus is forecasting an increase), that will underscore the narrative for the Fed pausing at their next FOMC meeting on September 19-20. But if we do see a rise, or worse, and even bigger increase than expected, that's yet another piece of data that favors further tightening. So all eyes will be on this morning's PCE report. And then tomorrow we'll get the Employment Situation report. Another important report that could impact the Fed's monetary policy. Should be a busy two days between today and tomorrow. At the moment, all of the major indexes are up for the week. A few market friendly reports could help them close the week that way. If so, that would make it 1 up week in a row for the Dow, and 2 up weeks in a row for the S&P and Nasdaq. BTW, the PCE inflation report comes out at 8:30 AM ET. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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