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Highlights:
US stock markets closed the week on a positive note, with the Dow Jones leading the gains.
Focus shifts to Federal Reserve meeting minutes and upcoming core PCE inflation data.
Core PCE inflation shows signs of slowing, but concerns remain regarding inflationary pressures.
US stocks finished the week with a strong performance, led by the Dow Jones Industrial Average, as market participants gravitated towards cyclical sectors poised to benefit from a robust economic backdrop. However, the technology sector displayed some caution following Nvidia's mixed earnings report, highlighting a wall street (OTC:WSSE) potential headwind for the growth-heavy sector.
In political news, President-elect Donald Trump introduced Scott Bessent as his nominee for the US Treasury secretary position. With a background working with prominent hedge fund figures like George Soros and Stanley Druckenmiller, Bessent's nomination is being viewed favorably. His previous advocacy for gradual tariff implementations aligns with expectations for a careful economic policy approach under his leadership.
The upcoming week will see a focus on key economic data, including the Federal Open Market Committee (FOMC) meeting minutes and the core personal consumption expenditures (PCE) price index. The core PCE is the Fed's preferred inflation gauge and will be closely monitored for insights into potential shifts in monetary policy.
For September, core PCE inflation showed an annual increase of 2.7%, marking the first rise since August 2023. October’s data is projected to reveal a further uptick in inflation, with expectations of a 0.3% month-on-month increase, lifting the annual rate to 2.8%. This could signal slower progress in controlling inflation, influencing market sentiment toward future interest rate adjustments by the Federal Reserve.
Despite the uptick in core PCE, goods inflation is anticipated to remain subdued, and shelter inflation is likely to continue moderating. With the labor market improving beyond pre-pandemic levels, wage growth is expected to slow, which may reduce inflationary pressures in the services sector over time.
As the month progresses, financial markets are likely to experience rebalancing activity, with asset reallocations potentially delayed until after Trump’s inauguration.
