Stocks Closed Higher On Friday After Better-Than-Expected PCE Inflation Report, But Lower For The Week Stocks closed solidly higher on Friday, although still down for the week. Friday's Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge, came in slightly better than expected. The headline number was up just 0.1% m/m vs. last month's 0.2% and views for 0.2%. The y/y rate came in at 2.4% vs. last month's 2.3%, but under the consensus for 2.5%. The core rate (ex-food & energy) was up 0.1% vs. last month's 0.3% and estimates for 0.2%, while the y/y rate was at 2.8%, in line with last month and below expectations for 2.9%. In spite of the lower open on Friday, there was a sense of relief after the report. In fact, for a time, it looked like the market was going to stage a key upside reversal on Friday. All of the major indexes gapped lower on the open, and below the previous day's low, before quickly heading back up. By mid-morning they were all in the green, and by early afternoon they were hitting their best levels of the day. The big three indexes (Dow, S&P 500 and Nasdaq) saw prices soar well above their previous day's high. However, by the end of the day, they closed mostly below their previous day's high. Still a solid gain. But they just missed the definition of a key upside reversal, which is marked by an open below the previous day's low, and a close above the previous day's high. (Key reversals are powerful patterns, but very rare.) Note, while the Dow did manage to close just above the previous day's high (which technically is a key reversal), the ETF, which tracks the Dow (ticker DIA) did not. And with none of the other indexes doing it, seeing just one index marginally qualify reduces the significance of the event. Nonetheless, it was a solid up move. Ordinary reversals are still important. And we could see the market build on that as we head into the end of the year. As you know, the market got rocked midweek last week after the Fed forecast two fewer rate cuts next year. But the takeaway should not have been a downer. Instead, the Fed seemed quite pleased with the economy, remarking how much inflation has come down, which has allowed them to slash rates by 100 basis points already. And Fed Chair Jerome Powell marveled that "the U.S. economy has just been remarkable," and that he feels "very good about where the economy is." In other news, Friday's Consumer Sentiment Index came in at 74.0, in line with last month and views for the same. The year-ahead inflation expectations, which is also part of that report, dipped to 2.8% vs. last month's 2.9% and estimates for 2.9%. This week is the last full week of trading for 2024. But, of course, the market will be closed on Wednesday for Christmas. So only 4 trading days this week. And then 2 more trading days next week before the year is over. The market is closed next Wednesday for New Year's Day. And then the 2025 trading year begins. YTD, the Dow is up 13.7%; the S&P 500 is up 24.3%; the Nasdaq is up 30.1%; the small-cap Russell 2000 is up 10.6%; and the mid-cap S&P 400 is up 12.3%. It's been a spectacular year so far. And I would not be surprised to see it finish on an even stronger note. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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