March 13 - U.S. equity futures moved modestly higher on Friday as market participants digested fresh inflation and growth data that could inform the Federal Reserve's future policy decisions.
The Personal Consumption Expenditures index, which is the Federal Reserve's preferred measure of inflation, increased 0.3% in January on a month-over-month basis, matching economists' expectations of a 0.3% rise. On an annual basis, the PCE index rose 2.8%, slightly below projections that had called for a 2.9% increase.
Core PCE, which excludes food and energy and is watched closely for underlying inflation trends, advanced 0.4% in January on a month-over-month basis, consistent with economists' forecasts of a 0.4% gain.
Alongside the inflation figures, the Commerce Department's second estimate for gross domestic product showed that GDP rose 0.7% in the prior quarter. That outcome fell short of the 1.4% growth rate expected by economists polled by Reuters.
Market moves reflected the immediate reaction to those data points. At 8:31 a.m. ET, Dow E-minis were up 201 points, or 0.43%, Nasdaq 100 E-minis were up 102.25 points, or 0.42%, and S&P 500 E-minis were up 29.75 points, or 0.44%.
Investors reviewed the combination of a monthly PCE increase in line with forecasts, a slightly lower-than-expected annual PCE reading, and a weaker-than-anticipated GDP revision to evaluate possible implications for the Federal Reserve's policy stance. The data set provided both inflation and growth signals that market participants were using to gauge future interest-rate considerations.
Clear summary
Futures moved higher on March 13 after January's PCE inflation figures matched monthly forecasts while annual inflation was a touch softer than expected, and Commerce Department revisions showed quarterly GDP growth below economists' estimates. Traders weighed these results for insight into the Fed's potential policy path.
Key points
- PCE, the Fed's preferred inflation gauge, rose 0.3% in January month-over-month and 2.8% year-over-year, versus a 2.9% year-over-year expectation.
- Core PCE increased 0.4% month-over-month, in line with forecasts.
- The Commerce Department's second GDP estimate reported 0.7% quarterly growth, below the 1.4% economists had anticipated.
Risks and uncertainties
- Uncertainty about the Federal Reserve's response to the mixed inflation and growth signals - markets are watching for any policy-calibrating moves. This affects interest rate-sensitive sectors and financial markets.
- The softer GDP revision introduces uncertainty over economic momentum and could influence market sentiment across equities and other risk assets.