Stocks spent most of Thursday morning in positive territory as investors cheered the latest inflation data. While the indexes ran out of steam around lunchtime, a mid-afternoon rally brought them off their session lows, and put a cap on what's been a very tough month for the equities market.
The Bureau of Economic Analysis this morning said its July personal consumption and expenditures (PCE) index, which tracks consumer spending, was up 0.2% month-over-month and 3.3% year-over-year. While the monthly figure matched what was seen in June, the annual increase accelerated from the prior month.
The monthly increase (0.2%) in core PCE, which excludes volatile food and energy prices, was also unchanged from June, while the annual rise (4.2%) was slightly higher. Also included in the report was data on consumer spending, which rose 0.8% from June to July, while personal income ticked 0.2% higher.
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"The July PCE price index data have cast a shadow on the recent string of disinflation," says Barclays economist Pooja Sriram. "While price pressures at both the core and supercore levels have indeed receded since the beginning of the year, the PCE price data suggest that the progress has been slower."
Even with the "disappointing" details of today's report, Jeffrey Roach, chief economist for LPL Financial, expects the Federal Reserve will keep interest rates unchanged at its September meeting.
Market participants also received some more jobs data today, with the Labor Department reporting initial jobless claims fell by 4,000 last week to 228,000. The previous week's data was revised up by 2,000 to 232,000. While this data point is certainly notable, the most anticipated update on the labor market comes tomorrow morning with the release of the July jobs report.
Salesforce sizzles on earnings, AI hopes
In single-stock news, several tech stocks sizzled after reporting earnings. Most notably, Salesforce (CRM) jumped 3.0% after a beat-and-raise report, bringing its year-to-date return to 67%, the highest of all Dow Jones stocks. The developer of customer relationship manager (CRM) software also said its fiscal Q2 operating margins, which measures the amount of revenue a company keeps as profit, was 31.6%.
Oppenheimer analyst Brian Schwartz thinks there are several reasons Salesforce will continue to "drive durable growth and higher margins" over the next year or so, including price increases and a stronger outlook for the second half of its fiscal year, as well as the company's generative AI initiatives. As to the latter, CEO Marc Benioff said on last night's earnings call that "we are very thirsty to make sure that Salesforce is the No. 1 AI CRM."
At the close, the tech-heavy Nasdaq Composite was up 0.1% at 14,034, while the broader S&P 500 (-0.2% at 4,507) and the blue chip Dow Jones Industrial Average (-0.5% at 34,721) both ended with modest losses. For August, the Nasdaq shed 2.2%, the S&P 500 fell 1.8%, and the Dow dropped 2.4%.
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