Stocks Up Yesterday, All Eyes On This Morning's PCE Inflation Report Stocks closed higher yesterday led by the mid-cap S&P 400 with 1.15%, and the small-cap Russell 2000 with 1.07%. Wednesday's FOMC announcement on holding rates steady had little carryover impact on the market since it was already baked in. And nothing was said that wasn't pretty much already known. The market is still expecting 2 rate cuts this year. But not until May or June. Wednesday afternoon's earnings, in aggregate, helped lift stocks yesterday. And yesterday afternoon's earnings should help do the same for stocks today. After the close yesterday, Apple posted a positive EPS surprise of 1.69% and a sales surprise of 0.24%. That translated to a quarterly EPS growth rate of 10.1% vs. this time last year, and a sales growth of 3.95%. While sales in China fell by -11%, and total iPhone sales fell slightly, their services division grew by 14%, hitting an all-time record, which also helped their gross margins hit an all-time record as well of 46.9%. And their forecast for next quarter has midpoint margin expectations climbing even higher to 47.0%. Shares were down -0.74% in the regular session before earnings, but were up more than 3% in after-hours following earnings. Today we'll hear from another 54 companies, including Exxon Mobil, AbbVie and Novartis. In other news yesterday, the advance estimate for Q4'24 GDP came in at 2.3%, a bit softer than Q3's 3.1% and views for 2.6%. (Q4 PCE, also part of the GDP report, came in hotter, however, at 4.2% vs. last month's 3.7% and estimated for 3.1%). Weekly Jobless Claims fell -16,000 to 207,000 vs. expectations for 224,000. And the Pending Home Sales Index was down -5.5% m/m vs. last month's 1.6% and the consensus for 0.4%. The Index itself came in at 74.2 vs. last month's 78.5. Today we'll get the Employment Cost Index and the Chicago PMI. But the report everybody is really waiting for is the Personal Consumption Expenditures (PCE) index. This will show December's inflation numbers. (Q4's GDP report showed inflation coming in hotter than Q3 by half of a percentage point. Is that foreshadowing for today? We'll soon find out.) In the meantime, the consensus has the headline number coming in at 0.3% m/m vs. last month's 0.1%. The y/y rate is expected to rise to 2.6% vs. last month's 2.4%. The core rate (ex-food & energy) is expected to hit 0.2% m/m vs. last month's 0.1%, while the y/y rate is forecast at 2.8%, in line with last month. Late in the day yesterday, stocks were taken off their intraday highs after President Trump announced he would be implementing 25% tariffs on Canada and Mexico on Saturday, February 1 (as he had previously indicated). On Thursday afternoon, when he announced it, he had not yet made a decision on whether it would include oil. But he said his administration would likely make that decision overnight. Overall, the tariffs are being used to induce those countries to curb illegal immigration. But the question on oil tariffs pivoted to whether the price we're being charged was fair. Going into today, only the Dow was pacing higher for the week. But the small-cap and mid-cap indexes are just a handful of points away from getting into the green. The S&P and the Nasdaq have a little more ways to go. But one good day could get them over that threshold as well. Should be a busy day today, Best,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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