NFP, CPI, Oil Crash, and De-escalation Shift Focus; Fed Decision Triggers Tech Selloff; PCE at 4.1% Reinforces Inflation; Fed Abandons Forward Guidance; NFP Miss Pushes Dow to Record Close 52,900
Key Questions
What was the latest PCE inflation reading and how does it compare to previous data?
The PCE data released on June 25 came in at 4.1% year-over-year, above the prior reading of 3.8%. This reinforces expectations of persistent inflation and further rate hikes.
What major shift did the Fed make in its communication after the June 17 meeting?
The Fed abandoned forward guidance, which markets interpreted as a hawkish surprise leading to pricing in two rate hikes. This change has contributed to rising yields and headwinds for equities.
What are the next major market catalysts mentioned in this highlight?
The upcoming NFP employment report is the next key event, along with the start of earnings season and Alphabet's inclusion in the Dow. Oil prices below $80 and a retreating VIX provide some market offset amid mixed stock performance.
After the Fed's hawkish surprise on June 17, markets priced in two rate hikes. PCE data released June 25 came in at 4.1% y/y, above the prior 3.8%, reinforcing persistent inflation and rate hike expectations. New data: ISM manufacturing declined but still in expansion, ADP employment weak at 98k, and the Fed abandoned forward guidance—a major shift in communication. On July 2, nonfarm payrolls missed badly at 57k vs 110k expected, pushing the Dow to a new record close of 52,900. Oil below $80 and VIX retreat provide some offset. The dollar test and rising yields still pose headwinds. Earnings season and Alphabet's Dow inclusion are next key catalysts.