Stocks Post Stunning Late-Day Rally On Friday, But Still Close Mostly Lower For The Week Stocks closed sharply higher on Friday, but still ended lower for the week, with the exception of the Dow, which managed a positive weekly close. Friday's Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge, helped lift stocks. The PCE report showed headline inflation up 0.3% m/m, which was in line with last month, and better than expectations for 0.4%. On a y/y basis it came in at 2.5%, an improvement from last month's 2.6%, and in line with views. The core rate (ex-food & energy) was up 0.3% m/m vs. last month's 0.2%, and matching estimates. The y/y rate eased to just 2.6% vs. last month's 2.8% and in line with the consensus. This was welcome news as the previous CPI (retail inflation) and PPI (wholesale inflation) reports both showed inflation ticking up. In other news, Retail Inventories slipped -0.1% m/m, but was an improvement vs. last month's -0.5%. Wholesale Inventories were up 0.7% vs. last month's -0.4%. And the Chicago PMI improved to 45.5 vs. last month's 39.5 and estimates for 41.0. The market is still wrestling with what to do about the upcoming tariffs. Late last week, President Trump said that the paused 25% tariffs on Canada and Mexico would go on starting March 4. And that an additional 10% tariff would go on China. There's been talk that Mexico might place a 10% tariff on China as well, and that maybe Canada would do the same. There's no confirmation on either yet. But there's hope that if they did, the tariffs on our trading partners to the north and south of us could be paused yet again, or possibly reduced. Then we have the impending expected reciprocal tariffs on our other trading partners that impose them on us. Those are supposed to go on sometime in April after the April 1 study is completed and analyzed. This week we'll get the usual docket of economic reports. But it culminates on Friday with the always important Employment Situation Report form the Bureau of Labor Statistics (BLS). With all of the talk of government worker layoffs, it's unknown how that will affect the February numbers just yet, given the February report only includes a portion of the first half of the month. Will a large decrease in the government workforce elicit the same kind of concern as a decrease in the private sector? Especially since the public payroll layoffs have been so widely telegraphed, and is not necessarily a reflection of the economy? We shall see. The market will also be watching estimates for Q1'25 GDP. The Federal Reserve Bank of Atlanta's GDPNow estimate has been slashed to -1.5%, down from a Q1 estimate of 2.3% from just the previous week. There are seasonal factors that can weigh on Q1's GDP. And we also have the potential skewing of a rush of imports in an effort to beat the new tariffs. (An increase in imports vs. exports can depress GDP numbers.) Lots of unknowns for the market to grapple with this week and in the weeks and months to come. That includes the fate of the budget resolution. The Senate's version did not include the Administration's tax cut extension, while the House version did. The deadline for something to get passed is March 14 to avoid a government shutdown. Should be a busy week this week. And after Friday's stunning late-day comeback, the markets will be seeing if they can build on that nascent rally. See you tomorrow, ![Kevin Matras - Signature]() Kevin Matras
Executive Vice President, Zacks Investment Research | 
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