Market Awaits PCE Numbers Due Thursday
Pre-market futures are up somewhat after a three-day weekend, as trading is expected to shift toward lower daily volume as in normal summer months. Calendar Q2 still has a week and a half left, and earnings season won’t pick up for a week or two after that. Even still, the Dow is +70 points at this hour, the S&P 500 is flat, the Nasdaq +90 and the small-cap Russell 2000 +10 points at this hour.
Trading has been mostly flat over the past week, with only the tech sector pulling the Nasdaq higher. Year to date, we’re still up big: +20% or higher on the Nasdaq and Russell 2000, +9.8% on the S&P 500 and +7.7% on the blue-chip Dow. Spot oil prices are still down in the mid-high $70s this morning, while the yield curve continues to narrow between 2-year and 10-year T-bills: +4.22% and +4.45%, respectively.
The peace Memorandum of Understanding (MOU) between the U.S. and Iran was a bit bumpy over the weekend, though Vice President J.D. Vance remains in Switzerland this morning and says negotiations are “going great.” Market indexes aim for their third-straight week of gains.
Remembering Former Fed Chair Alan Greenspan
Over a nearly 20 year period from 1987 to 2006, Alan Greenspan presided as Fed Chair over the terms of four presidents: Reagan (who nominated him), GHW Bush, Clinton and GW Bush. His initial tenure was greeted with a market crash two months after taking the helm, at which time he wasted no time expressing the Fed would serve as a source of liquidity to overcome the collapse.
Earlier in his career, Greenspan was part of author/philosopher Ayn Rand’s inner circle, where he advocated Objectivism, a line of thinking which tied morality to personal happiness. This became a component on American conservatism in the 20th and 21st centuries, in which Greenspan joined with fellow economist Milton Friedman. Yet Greenspan was also supportive of President Clinton’s deficit reduction program in 1993. One of his most enduring phrases was “irrational exuberance,” which he tagged as far back as the mid-1990’s.
Greenspan was criticized at times for overseeing loose monetary policy, a late reaction to the “dot-com bubble” at the turn of the century, and his rather opaque explanations in Fed statements. There existed a veritable cottage industry of finance writers describing what Greenspan’s statements really meant. Ultimately, however, Greenspan will likely be remembered as a free-market advocate who oversaw a particularly successful time period of the American economy.
What to Expect from the Market This Week
As always, we’ll keep an eye on the MOU with Iran, and what it means for the Strait of Hormuz and gasoline prices here at home. Otherwise, the main economic print this week will be Personal Consumption Expenditures (PCE) for May on Thursday morning. Last time around, we hit three-year highs in year-over-year PCE at +3.8% on headline, +3.3% on core.
PCE had been the preferred inflation indicator of recently departed Fed Chair Jerome Powell (who stays on as Fed Governor for the time being). New Fed Chair Kevin Warsh did not mention PCE by name in his inaugural press conference last week, but it’s a safe bet +3.3% core inflation (minus volatile food and energy prices) is notably above optimal levels.
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