Jobless claims slipped to 233,000 in the week of Juneteenth, but the four-week trend hit a nine-month high. S&P 500 futures erased modest losses as Wall Street’s focus turned to tonight’s presidential debate and the key Federal Reserve inflation report out Friday morning.

economic data to guide its decisions. One of the Fed’s key metrics is the monthly PCE report, which tracks personal consumption expenditures. How does the PCE price index impact the stock market? IBD News Editor Ed Carson explains.” vid-name=”What Stock Market Investors Need To Know About The PCE Report” vid-cat=”IBD Explains” vid-date=”06/04/2024″ vid-date-tmsp=”1717484310″ vid-image=”https://www.investors.com/wp-content/uploads/2024/05/IBD_Explains_PCE-640×360.jpg” vid-authors=”MEREDITH HEYMAN”>
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What Stock Market Investors Need To Know About The PCE Report

Initial Jobless Claims

New claims for unemployment benefits eased 6,000 from a revised 239,000 in the week through June 22. Wall Street economists expected 236,000 new jobless claims.

While laid-off workers can file online, unemployment office closures for Juneteenth may have affected the total.

The four-week average of claims rose 3,000 to 236,000, the most since September. The ranks of unemployed workers continuing to claim benefits because they were unable to find work rose 18,000 to 1.839 million.

Q1 GDP, Durable Goods Orders

Also on Wednesday, first-quarter GDP grew 1.4%, revised up from 1.3%, the Commerce Department said. However, personal consumption expenditures rose just 1.5%, revised down from 2%.

Meanwhile, data revisions now show the Fed’s primary inflation rate, the core PCE price index, rising at a 3.7% annual rate in Q1, which was bumped up from 3.6%.

With the consumer taking a step back, healthy capital spending becomes more important. But the latest signals weren’t great. Economists focus on nondefense capital goods orders excluding aircraft. In May, these orders unexpectedly fell 0.6%. The data can be volatile, so the 3-month trend is a better indicator, but that’s running negative as well, with declines in two of the past three months.

Fed Rate-Cut Outlook

Recent economic signals including soft retail sales, weak home sales and a resumption of the disinflation trend after some contrary data to start the year have raised expectations that the Fed will pivot to rate cuts at the September meeting. A host of retailers have announced price cuts, while the consumer price index showed that new vehicle prices 0.5% in May, the biggest drop since the outset of the pandemic in April 2020.

San Francisco Fed President Mary Daly said in a Monday speech that “the balance between the demand and supply of workers has largely normalized.” The Fed has to be on alert because further declines in the demand for labor may show up in higher unemployment, not just fewer job openings.

After the jobless claims and other data, markets were pricing in 64% odds of a Fed rate cut by the Sept. 18 policy meeting, up from 62% ahead of the reports. Markets now see 63% odds of at least two quarter-point rate cuts before the end of 2024, up from 60%.

PCE Report

Economists expect the core PCE price index, out Friday morning, to rise 0.1% in May, according to FactSet. That would lower the 12-month core inflation rate to 2.6%, which would be the lowest since March 2021.

The inflation data is part of the Commerce Department’s personal income and outlays report. Personal consumption expenditures are seen rising 0.3%. Personal income is expected to rise 0.4%.

In addition to the focus on inflation, economists will focus on consumption and whether stronger spending on services offset tepid spending on goods.

S&P 500

S&P 500 futures erased minor losses but were essential flat after the jobless claims data. On Wednesday, the S&P 500 edged up 0.2%, finishing just 0.2% below its all-time closing high on June 18.

Still, 327 S&P 500 stocks fell on the session, while 174 rose.

Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.

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