Stocks Closed Lower Yesterday, All Eyes On This Morning's PCE Inflation Report Stocks closed sharply lower yesterday, led by the Nasdaq's -2.78% decline. The market came under pressure in the afternoon when it was announced that the U.S. would be implementing those 25% tariffs on Canada and Mexico next week. As you know, they were suspended for 30 days. But that time has run out and the tariffs are going on. Additionally, the 10% tariffs on China will be doubling next week. The reciprocal tariffs on other trading partners that impose them on us are expected to take place sometime in April, after the April 1 study has been completed and assessed. While those won't be going on next week or next month, April is right around the corner. In other news, yesterday's Weekly Jobless Claims jumped more than expected with an increase of 22,000 at 242K vs. views for 224K. Although, the smoother 4-week moving average came in at 224K vs. last month's 215.5K. The Durable Goods Orders report showed new orders up 3.1% m/m vs. last month's -1.8% and estimates for 1.9%. Ex-Transportation it was flat (0.0%) m/m vs. last month's 0.1% and expectations for 0.4%. And Core Capital Goods were up 0.8% vs. last month's 0.2% and the consensus for 0.5%. Pending Home Sales were down -4.6% m/m vs. last month's -4.1% and estimates for -1.2%. The index itself came in at 70.6 vs. last month's 74.0.
And yesterday's second estimate for Q4'24 GDP came in at 2.3%, in line with last month's initial estimate and the consensus. Today well get the PCE (Personal Consumption Expenditures) index for January. This is the Fed's preferred inflation gauge. The last two inflation reports (CPI and PPI) both showed progress on inflation stalling, and even ticking up a bit. The headline number is expected to come in at 0.4% m/m vs. last month's 0.3%, while the y/y rate ticks down to 2.5% vs. last month's 2.6%. The core rate (ex-food & energy) is expected to come in at 0.3% m/m vs. last month's 0.2%. And the y/y rate in expected to ease to 2.6% vs. last month's 2.8%. That would be welcome news to the market. We'll also get the International Trade in Goods report, Retail and Wholesale Inventories, the Chicago PMI report, and the Baker Hughes Rig Count report. All of the major indexes (except for the Dow) are now lower YTD. Some of the indexes are in pullback or correction territory, and others are near it. The Dow is down -3.94% from their all-time high close last December. The S&P 500 is down -4.60% from their all-time high close just last week. The Nasdaq is down -8.08% from their all-time high close last December. The small-cap Russell 2000 is down -12.4% from their high close last November. And, the mid-cap S&P 400 is down -9.60% from their all-time high close from November. Pullbacks are defined as a decline between -5% and -9.99%, and they happen on average of 3-4 times and year. And corrections are defined as a decline between -10% and -19.99%, and they happen on average of about once a year. As painful as pullbacks and corrections are, they are very common. Every bull market has them. I point this out because if you know these are commonplace moves, you can instead look at them as opportunities to buy rather than places to sell. Still no fun while it's happening. But they are usually pauses that refresh, and a place to get in before the next leg up. Best,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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