Can stocks fall Friday?
The PCE (personal consumption expenditures) Price Index Excluding Food and Energy, also known as the core PCE price index, reports as part of the monthly Personal Income and spending. The core index excluding two food and energy categories will give a better and clearer view of inflation. Federal Reserve watches this number closer to set its monetary policies. Friday, June 25, United States will publish its PCE and Core PCE numbers.
Before studying the inflation numbers, I have to mention that Thursday`s Jobless Claims and Durable Good Orders missed the market expectations. According to the United States Department of Labor, initial claims for the week ended June 19 fell 7,000 from the week before that to 411,000. So, even though it decreased last week, we missed the expectations in the past two weeks.
Friday, June 25. After contradictory statements from FOMC members during the week, we get much closer to the due day. We will know the actual situation of inflation. Amidst all of the recent concern about rising inflation, it`s important to remember that for all of the significant increases seen in current CPI and PPI data over the past month, with CPI hitting its highest levels since 2008, that the Fed doesn`t look at either when assessing the inflation outlook. The US central bank`s twin mandate of unemployment and inflation uses the core PCE as its primary inflation benchmark, which in April doubled from the 1.8% seen in March, coming in at 3.6%, the highest level since June 2008. This month`s number is not expected to be immune to the continued move higher in price pressure, and further increases in the PCE deflator could well reignite market concerns about the longer-term growth of inflation. Market estimates for a sharp rise to 4%, which, if it happens, would be the highest level since the early 1990s. Core PCE deflator is expected to a similarly sharp increase from 3.1% to 3.5%.
And finally, another leading indicator is the US Personal Spending/Income, which is also due to release Friday. If we take the retail sales numbers for May as the signal, this week`s spending number could decrease. This number also must be watched closely, as it is directly affecting inflation as well.
Conclusion: Any surprise in inflation numbers towards 4% or even more will hit the markets, as it will put the FED in a weaker area to support the more significant stimulus, but lower numbers, reassures the Federal Reserve of its facilitation policies, which is positive for Stock markets bulls, as well.
US dollar technical overview - H4
Despite today`s decline, the US dollar index is still trading higher and could not breach under 91.50 the 50 EMA. The price is back above the OBV trend line, and RSI returned above 50, signaling that higher numbers are still more likely. In the H1 chart, the price moved above both 20 and 50 MA lines and supporting the current uptrend and higher time-frames.
