PCE Inflation: Catalyst for US Market & MSTR ?
Major US stock indexes stabilized on Thu, 19 Dec 2024 but failed to hold onto early gains.
This comes a day after the Fed's Wednesday revised outlook for interest rates and inflation, triggering a steep selloff.
By the time market called it a day: (see above)
-
DJIA: +0.04% (+15.37 to 42,342.24). Snapped its 10-day stretch of decline. Still, it was the longest streak of daily losses since 04 Oct 1974.
-
S&P 500: -0.09% (-5.08 to 5,867.08). Registered 2 new 52-week highs & 40 new lows.
-
Nasdaq: -0.10% (-19.92 to 19,372.77). Recorded 29 new highs and 276 new lows.
Trading volume on US. exchanges was 16.33 billion shares, compared with the 14.52 billion average for the full session over the last 20 trading days.
US Q3 GDP - Final.
On Thursday morning, US market rose initially after the Commerce Dept released the final estimates on US Q3 Gross domestic products (GDP). (see above)
Data showed US economy grew by an annualized 3.1% in Q3 2024, beating expectations from economists polled by The Wall Street Journal.
The final reading is +0.3% higher than the 2 preliminary readings of 2.8%. It was good news while it lasted.
US Weekly Jobless Claims.
Another piece of good news was US weekly jobless claims. (see below)
Initial claims decreased by -22,000 to 220,000 for week ended 14 Dec 2024.
Economists polled by Reuters had forecast 230,000 claims for the latest week.
Looking at past weeks data, claims have entered a period of volatility, that could see large swings in the data. How so ?
-
Previous 2 weeks, initial claims have increased by +27,000.
-
This week, its -22,000 claims less.
If this is not volatile data, unsure what would be.
The 2 set of economic data was in sync with the Fed's view on US sticky inflation.
Capitol HIll Politics.
US market ‘weak’ sentiments were further rocked by US politics piling unnecessary pressure on US market.
On Thu, 19 Dec 2024 a Republican spending Bill (backed by President-elect Donald Trump) failed to pass through the US House of Representatives.
This left US Congress with no clear plan to avert a fast-approaching government shutdown that could bring the country to a halt.
The president-elect wants the lawmakers to approve unlimited government borrowing by removing the national debt ceiling before he takes office on 20 Jan 2025.
It is a disgrace cat & mouse game that the two US parties engaged in very often, as a result of living beyond their means.
What Else ?
Apart from dirty politics souring market sentiments, two other events served to depressed US market further today.
They are:
-
US quadruple witching.
-
US inflation report - personal consumption expenditure (PCE).
Quadruple Witching.
Today is the quadruple witching Friday - 20 Dec 2024 - where the 4 types of derivatives (namely (1) stock options, (2) stock index options, (3) stock index futures, (4) single stock futures) - expire simultaneously.
According to derivatives analytical firm Asym 500:
-
December quadruple witching will see some $6.5 trillion worth of options fall off the board. (see above)
-
Statistically, December’s quadruple witching is the largest this year.
-
Although it is smaller (in value) compared to December 2023’s.
-
Just to be safe, investors will also need to keep an eye out for end of the year. This because a big option is expiring then, that could cause more volatility.
Personal Consumption Expenditure (PCE).
US’s November 2024 inflation report will be out today.
PCE Forecast is as follows:
Headline inflation.
-
Monthly: Expected to remain status quo at 0.2%, same as October 2024.
-
Annual: Expected to record 2.5% vs October 2024’s 2.3%.
Core inflation.
-
Monthly: Forecast to come in at 0.2% vs October 2024’s 0.3%
-
Annual: Forecast to come in at 2.9% vs October 2024’s 2.8%.
PCE forecasts fall in lined with Mr Powell’s comments of a sticky US inflation.
My viewpoints: (mine only)
Some corners of the market that were beaten down on Wednesday bounced back.
Big tech stocks staged a mild recovery.
Case in point - shares of $NVIDIA(NVDA)$ rose +1.4%, closing the day at $130.68 per share.
Heading into Friday, Nvidia’s pre-market indicators are forecasted to open lower at -2.47% or $127.45, while analysts and traders digest the 2 events, mentioned above.
I believe Fri, 20 Dec 2024 will be another consolidation for US stock market, not unless PCE inflation data falls marginally lower than forecasts.
The recent CPI and PPI reports in December showed higher-than-expected inflation. (click here ! for details, Repost to share)
Since these are used to calculate PCE, it's likely that the PCE report will also be higher than expected.
In the end, the apple does not fall far from the tree - another ‘mis-quoted’ quote but I think readers know what I am getting at…
Bitcoin Thursday Tumble.
In addition to the US stock market decline on Thursday, Bitcoin also dropped below $96,000.
Its attempt to bounce back above $100,000 quickly faded earlier during the day and slid to the low-$97,000s during the US day.
It modestly recovered to around $98,000 before another leg lower brought prices below $96,000, down -4.8% over the past 24 hours.
As of drafting this post, Bitcoin has slid further to $94,731.65.
Bitcoin prices had enjoyed a relentless rise recently, so a "pullback like this nothing to be alarmed.
Question remains, when will it be able to rebound back above the $100,000 price level ?
Chain Reaction.
In my yesterday’s post (click here ! for details) I have shared about $MicroStrategy(MSTR)$ and how it has become synonymous with Bitcoin, due to its aggressive Bitcoin acquisition strategy under CEO, Michael Saylor.
Saylor has been a vocal advocate for Bitcoin, viewing it as a digital store of value and a hedge against inflation.
While MSTR's Bitcoin strategy has generated significant returns during the recent Bitcoin bull run, it also exposes the company to significant price volatility and market risks associated with cryptocurrencies. (see below)
On Thursday, Bitcoin felling has a chain reaction on MSTR.
MSTR closed at $326.46, down -6.63% from the previous day's closing price.
The stock traded in a range of $323.48 - $367.50, with a trading volume of 26,736,867 shares.
With MSTR’s Friday pre-market price is slated to fall further -6.66% to $304.72.- what is the “right” strategy ? Sell MSTR now and buy it back at a lower price, or hold on to it & hope the price recovers?
Must Read: Click on below titles to access. Repost to share, Like as encouragement ok. Thanks.
-
Do you think US market will continue to slide today ?
-
Do you think MSTR will continue to slide even if Bitcoin manage to recover ?
If you find this post interesting, give it wings! ️ Repost and share the insights ?
Do consider “Follow me” and get firsthand read of my daily new post. Thank you.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
Welcome to open a CBA today and enjoy access to a trading limit of up to SGD 20,000 with upcoming 0-commission, unlimited trading on SG, HK, and US stocks, as well as ETFs. Find out more here.
Other helpful links:
Pls "Re-post" so that more get to know. Tks! Rating is important (to me).
Consider "Follow me" and get first hand read of my Daily new posts? Thanks!). Tks!!