S&P 500 resets record high as price data awaited

The PCE’s supercore likely also slowed down to a more manageable 0.25 per cent gain.

Goldman Sachs’ economics team this week said it expects core PCE inflation to decline to 2.4 per cent by December 2024, reflecting further rebalancing in the auto, housing rental, and labour markets.

“We believe the Fed will remain on hold at the current fed funds rate range of 5.25-5.5 per cent until the first 25bp cut in June, after which we expect 25bp cuts in September and December, followed by four more cuts in 2025 and one final cut in 2026 to a terminal rate range of 3.25-3.5 per cent.”

As for the outlook for the S&P 500, most market watchers are optimistic.

In a note, Ryan Grabinski and Jonathan Byrne at Strategas Securities said while they wouldn’t be surprised if equity markets pulled back near term, “history would suggest that it’s too soon to fade equities”.

The strategists said the fact that Tech and Comm are beginning to lag is making some nervous, but under the surface it looks like a rotation is occurring. “That is by no means a negative sign.”

James Reilly, a market economist at Capital Economics, said while “the bulk of the gains for many risky assets are behind us”, he sees two reasons for it to power ahead.

“The continued strong performance of US equities has been partly driven by a compression of the equity risk premium there, and it now looks quite narrow. But it can narrow further. And we think that earnings expectations may keep growing if the US economy avoids a recession, as we anticipate it will.

“If equities keep up their winning streak,” Reilly said, “our once-punchy end-2024 forecast of 5500 for the S&P 500 (set in mid-2023) could be blown past. But the key point is that we ultimately think there is still plenty of room to the upside – our long-standing end-2025 forecast for the S&P 500 remains 6500.”

After rallying strongly on its debut, Reddit has faded. It slid 14. 6 per cent overnight, to $US49.32. Trump Media & Technology Group ended 6.4 per cent lower to $US61.96.

Market highlights

ASX futures flat at 7951

• AUD -0.3% to 65.13 US cents
• Bitcoin +2.5% to $US70,659 at 7.24am AEDT
• On Wall St: Dow +0.1% S&P +0.1% Nasdaq -0.1%
• In New York: BHP +0.3% Rio +0.4% Atlassian +1%
• Tesla -2.3% Microsoft -0.2% Apple -1.1% Nvidia +0.1%
• Alphabet +0.2% Amazon +0.3% Meta -1.6%
• VIX +2% QQQ -0.2% TLT -0.1%
• Stoxx 50 +0.03% FTSE +0.3% DAX +0.1% CAC +0.01%
• Spot gold +1.1% to $US2219.38/oz at 1.21pm in New York
• Brent crude +1.5% to $US87.38 a barrel
• Iron ore +0.5% to $US101.75 a tonne
• 10-year yield: US 4.20% Australia 3.96% Germany 2.29%
• US prices as of 1.59pm in New York

US economic outlook: ABA

The US economy is heading towards a soft landing, according to the latest forecast of the American Bankers Association’s Economic Advisory Committee.

The committee, composed of 16 chief economists from some of North America’s largest banks, forecasts real economic growth remaining healthy at around 1.7 per cent for 2024 and 1.8 per cent for 2025.

Recession odds have diminished somewhat over the last six months, although policy and geopolitical risks keep them close to 30 per cent both this year and next, the committee also said.

As for inflation, it is expected to continue gradually easing toward the Federal Reserve’s 2.0 per cent target by the latter part of 2025. The committee’s forecast is that core personal consumption expenditures (PCE inflation), the Fed’s preferred indicator, will be 2.4 per cent at the end of 2024 before reaching 2.1 per cent by year-end 2025.

The consensus view of the committee is that the Fed will begin cutting the target federal funds rate range in mid-2024, instituting three 25 basis point cuts before the end of this year.

Today’s agenda

The ASX is closed on Friday and Monday for the Easter break. Trading will resume on Tuesday.

Overseas data: Japan February industrial production; US February personal income, spending and Core PCE at 11.30pm

United States

The University of Michigan’s sentiment index climbed to 79.4 from 76.5 earlier in the month, reaching the highest since mid-2021, according to the final March reading issued Thursday. The 2.9-point gain from the preliminary reading was the biggest intramonth increase since August 2022.

Americans expect prices will climb at a 2.9 per cent rate over the next year, compared with the 3 per cent expected earlier in the month. They see costs rising 2.8 per cent over the next five to 10 years, the lowest since September.

Johnson & Johnson will pay $US75 million to settle a consumer protection lawsuit filed by Mississippi over the company’s talc-based baby powder, according to people familiar with the matter, resolving litigation in which the state had sought as much as $US6 billion.

Xiaomi is kicking off sales of its first electric vehicles with aggressive pricing. Co-founder Lei Jun presented his strategy in Beijing on Thursday evening with the base SU7 model costing 215,900 yuan ($US29,900) and prices stretching up to 299,900 yuan for the SU7 Max.

From Bloomberg

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