Summary:

• US January PCE core index Y/Y 1.5% vs 1.5% expected
• Initial jobless claims falls to lowest level since 1969
• S&P500 looking for 5th consecutive 1%+ daily swing; longest run since June ’16

Inflation has been a hot topic of late for the markets and today’s release of the Fed’s preferred measure was keenly anticipated. Unfortunately from a trading perspective the print was in line with forecasts and as such has had minimal immediate impact on the markets. 

 Core PCE remains well below the Fed’s target of 2.0%, with the inflation metric only matching or exceeding this target for 4 of the past 100 months. Source: Bloomberg

The PCE core price index for January in Y/Y terms came in at 1.5%, inline with forecasts. In M/M terms it rose slightly to 0.3%, as expected, meaning that overall there were no great shocks here. 

At the same time as the inflation figures there was also some more US data out with the standout being the initial jobless claims. This unemployment indicator fell to 210k from a previous reading of 220k (revised lower from 222k) and this is now the lowest level seen since December 1969. 

The US dollar has extended its recent run today with more gains seen in the buck. Emerging market currencies such as the ZAR and BRL are the biggest losers against the greenback but it is still only the GBP, NZD and cryptocurrencies that are enjoying a better day. 

 The USD is looking for another day of steady gains and is currently higher on balance. Source: xStation

The large drops seen in stocks at the start of last month were largely blamed on an expected increase in inflation but today’s data has had a fairly muted impact. The S&P500 (US500) on xStation) has closed either up or down by 1% or more in each of the last 4 sessions with the market showing an increased level of volatility.

The benchmark hasn’t changed more than 1% or more for 5 days in a row since it managed 6 in a row around Brexit in late June 2016. The all-time record for the market was 23 in a row during the Great Depression (Nov/Dec 1931). In modern times a streak of 15 was recorded in Sep/Oct 2002. 

 The US500 is playing the fib levels nicely of late and after breaking the 61.8% at 2746 yesterday it fell swiftly to the 50% at 2705. Source: xStation

 The US500 broke below the key support at the 61.8% fib at 2746 during yesterday’s session and swiftly fell to the 505 at 2705 which has attracted buyers and is holding for now. A further break lower would increase the probability of another attempt at the February lows of 2530 but if longs can gain traction around this level then 2746 may be tested from below.