Stocks supported on personal spending and inflation data

Stocks continue to rise since the US economic growth exceptionalism story does not appear to be going away anytime soon and as inflation still looks like it will be transitory.  It might be hard for stocks to hold onto gains heading into the long weekend and ahead of President Biden’s unveiling of his $6 trillion spending plan.    

Today’s data showed that the spending spree continues in America and inflation continues to come in hotter-than-expected.  A wrath of data suggests the economy will run hot this summer on reopening momentum and despite the waning impact from stimulus checks and as some households await the child tax credits in July.  

US Data

The April Core PCE Price index came in hotter-than-expected at 3.1% from an upwardly revised 1.9% prior reading, and well above the Fed objective of 2.0%.   The transitory thesis remains intact and that is why Treasury yields refuse to takeoff.  The 10-year yield pared earlier gains and is only 1.2 basis points higher at 1.587%. The dollar can’t muster up a significant rally unless Treasury yields rally back to the highs set in March.

Personal spending rose 0.5%, as expected and will likely rip higher as Americans continue to embrace pre-pandemic life and supporting service industries. 

Advanced Goods Trade Balanced eased a little which provides some upside for future growth prospects. 

The final May Michigan consumer sentiment report mostly matched the preliminary readings.  Inflation expectations for 1-year stayed steady at 4.6%, while the 5-10 year outlook. 

After a wide array of data, the inflation debate remains unchanged and transitory arguments are still in the lead. 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya