Weekly Market Update: December 9, 2024
The Federal Reserve looks ready to lower the federal funds rate by a quarter point, to a range of 4.25% to 4.50%, at next week’s monetary policy meeting. That would represent a full percentage point reduction since mid-September. Although inflation has proven somewhat sticky the last few months, the central bank has slowed the pace of price growth enough this year to justify another decrease.
The October Personal Consumption Expenditures (PCE) Price Index was in line with the consensus forecast. The headline PCE and core PCE, which excludes the more-volatile food and energy components, rose 0.2% and 0.4% respectively, on a month-to month basis, with the pace of price growth unchanged from September. On a 12-month basis, the PCE and core PCE increased 2.3% and 2.8%, respectively. Although these readings were stronger than the September figures, the headline PCE was not too far above the Fed’s target growth rate of 2.0%. This is unlikely to cause the Federal Reserve to pause on the interest-rate front next week, but such a breather is possible early next year.
The consumer sector continues to power the U.S. economy. The gross domestic product (GDP) advanced by an estimated annualized rate of 2.8% in the third quarter, and signs point to continued expansion during the final three months of this year. The consumer has been emboldened by an increase in personal income, which rose by a better-than-forecast 0.6% in October, and the persistent strength of the job market. Specifically, initial weekly jobless claims remain at a level indicative of a tight labor market. (Investors should note that the November jobs report was due out shortly after we went to press.)
The holiday shopping season got off to a strong start. According to Adobe Analytics, which tracks retail sales transactions, shoppers spent a record $10.8 billion online this Black Friday. This impressive start to the holiday season augurs well for the retailing industry and the overall health of the U.S. economy.
Conclusion: The major equity averages have touched new records in recent days. With the Fed likely to cut interest rates next week and the consumer sector looking strong, a further equity market rise as the year draws to a conclusion seems plausible.
Source: ValueLine.com
