U.S. Market Indexes Approach 2023 Highs After Watered-down Measure of Inflation Cooled

Barry Adams
30 Nov, 2023
New York City

Market indexes advanced after the alternative measure of inflation showed waning price increases.

The S&P 500 index and the Nasdaq Composite are set to close November with strong gains, primarily driven by optimism about future interest rate direction.

The S&P 500 index is up 8.5% and the Nasdaq Composite is ahead by 11%, and those gains were the best monthly gains since July 2022.

Moreover, market indexes are inching closer to their 2023 highs, and the indexes are expected to retain an upward bias in the two months ahead.

Market optimism was bolstered by the latest update on personal consumption expenditure, indicating prices are rising at a slower pace and personal income and spending after adjusting for inflation are still rising.

Investors also reacted to the fresh batch of earnings, and Salesforce, Pure Storage, Snowflake, and Five Below were in focus.

 

Inflation Gauge: PCE Price Index Slowed in October

The personal consumption expenditure price index was flat on a monthly basis in October, the Bureau of Economic Analysis reported Thursday.

The alternative watered down measure of inflation, preferred by policymakers, was the weakest since July 2022, after rising 0.4% in September and August. 

The annual rate also slowed to 3.0% from 3.4% in September, a low level not seen since March 2021.

Moreover, the annual core PCE inflation, which excludes food and energy, eased to 3.5% from 3.7%, a new low in 27 months.

Personal income and spending inched up 0.2% from the previous month, the monthly report showed.

 

U.S. Indexes and Yields

The S&P 500 index edged up 0.2% to 4,574.18, and the Nasdaq Composite increased 0.2% to 14,282.09.

The yield on 2-year Treasury notes decreased to 4.67%, 10-year Treasury notes inched higher to 4.30%, and 30-year Treasury bonds were unchanged at 4.47%.

Crude oil increased $0.82 to $78.68 a barrel, and natural gas prices rose 2 cents to $2.82 a thermal unit.

Gold decreased $4.40 to $2,039.90 an ounce after the U.S. dollar eased.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.23.

 

U.S. Stock Movers

Five Below was nearly unchanged at $188.0 after the deep discount retailer reported its third-quarter results.

Revenue in the third quarter increased 14.2% to $736.4 million from $645.0 million, and comparable store sales rose 2.5% from a year ago.

Net income in the quarter declined to $14.6 million from $16.1 million, and diluted earnings per share fell to 26 cents from 29 cents a year ago.

The company repurchased 500,000 shares in the third quarter at a cost of $80 million.

The company estimated net sales in the fourth quarter to be in the range of $1.32 billion to $1.35 billion, including an additional 60 stores, based on a 2% to 3% rise in comparable store sales.

Net income in the fourth quarter is estimated to be in the range of $201 million and $211 million.

Pure Storage plunged 15.7% to $32.17 after the data storage company estimated a lower-than-expected current quarter and annual revenue.

Revenue in the third quarter increased 13% to $762.8 million from $676.1 million; the company swung to net income of $70.4 million from a loss of $0.7 million; and diluted earnings per share were 21 cents compared to breakeven.

Subscription services revenue increased by 26% to $309.6 million, and subscription annual recurring revenue also increased by 26% to $1.3 billion.

Salesforce soared 9.2% to $251.53 after the customer contact management software company reported better-than-expected earnings.

Revenue in the third quarter increased 11% to $8.7 billion from $7.8 billion, net income soared to $1.2 billion from $210 million, and diluted earnings per share rose to $1.25 from 21 cents a year ago.

The company repurchased $1.9 billion of its stock in the third quarter.

The software company estimated fourth-quarter revenue to increase 10% and fall in the range of $9.18 billion and $9.23 billion and narrowed its full-year fiscal 2024 revenue outlook to an increase of 11% to between $34.75 billion and $35.8 billion.