Markets are closed – MarketWatch photo illustration/iStockphoto
Investors received key U.S. economic data at the end of the week with the release of the February Personal Consumption Expenditure Index, but there's a catch: Financial markets are closed for Good Friday.
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See: Is the stock market open on Good Friday?
U.S. stock markets will be closed on Friday, while the Treasury market closed Thursday's trading an hour earlier at 2 p.m. Eastern Time because of the holiday, as suggested by the Securities Industry and Financial Markets Association. However, since Good Friday is a market holiday and not a federal holiday, the government is open and expected to release economic data.
Last year, the March jobs report was released on Good Friday. Traders had the opportunity to trade stock index futures in a shortened session that ended at 9:15 a.m. ET. This will no longer be the case following the release of the PCE data as all trading in CME futures will be closed on Friday.
Live Coverage: PCE Report: Fed's Preferred Inflation Indicator Rises; Powell's appearance awaited
Prices in the US rose sharply again in February, reinforcing the view that inflation may not slow as much in 2024 as previously expected. The benchmark PCE index rose 0.3% last month, the Commerce Department said Friday. That's below the 0.4 percent forecast of economists surveyed by the Wall Street Journal. The annual rate rose to 2.5% in February from 2.4% in the previous month.
The core indicator – which excludes volatile food and energy components and is known as the Fed's preferred inflation gauge – rose 0.3% in February, a tick lower than the previous month. Core inflation fell from 2.9% to 2.8% in the 12 months to February.
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A rise in the latest consumer price index sparked some concern on Wall Street earlier this month, forcing some investors to scale back their expectations about the timing of the central bank's first interest rate cut. That's why Friday's PCE report will be “more important than usual” as it will show whether or not the previous inflation numbers were temporary setbacks or the start of a new trend of “longer-term higher inflation,” said Chris Zaccarelli, chief investment officer official from the Independent Advisor Alliance, in an emailed comment Wednesday.
With markets closed, traders will get their first chance to react when the futures market opens over the weekend to gauge whether Friday's inflation report changes the Fed's plan to cut interest rates three times in 2024, said Mike Cornacchioli, senior Vice President of Investment Strategy at Citizens Private Wealth Management.
Fed officials last week left interest rates unchanged for the fifth straight day, while the central bank's new “dot plot” showed policymakers stuck to their forecast of 75 basis points worth of rate cuts by the end of 2024. Fed fund futures traders are pricing this in. According to the CME FedWatch tool, the first rate cut of 25 basis points will come in June with a probability of about 61%.
Although Monday is likely to provide a clearer sign of what investors think of the data, Cornacchioli said he expected a muted reaction in financial markets due to “recency bias,” meaning investors would emphasize recent market-moving events over historical events .
“I think the risk in this report is to the downside,” he told MarketWatch in a telephone interview on Wednesday. “PCE data comes in higher than expected [could] Really challenge the narrative that Fed Powell laid out at his press conference because the window is closing on when policymakers can begin this rate cutting cycle if they want to push through three rate cuts this year.”
See: The stock market is experiencing one of the strongest first quarters of the post-war period. What this could mean for the rest of 2024.
Major U.S. stock indexes ended Thursday mostly higher, with the S&P 500 SPX and the Dow Jones Industrial Average DJIA hitting new records. Fed Governor Chris Waller said yesterday that high inflation numbers and strong employment gains reinforced his view that there is no rush to cut interest rates this year.
Stocks posted solid monthly and quarterly gains. The S&P 500 is up over 10% so far in 2024, making it its strongest first quarter gain since 2019. The Dow Jones Industrial Average is up around 5.6% in 2024 and is just below the 40,000 mark. According to Dow Jones Market Data, the Nasdaq Composite COMP closed the first quarter up 9.1%.
The last trading day of a month or quarter often involves rebalancing, as portfolio managers adjust their investments to reflect changes in the value of their stock and bond holdings. Although trading is widely expected by many market participants, it can still result in price fluctuations.
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