PCE data today: S&P 500 ‘gains may be tougher to come by from here’

U.S. stocks are in focus today after the Bureau of Economic Analysis said the core personal consumption expenditures price index was in line with expectations in February.

S&P 500 outlook after PCE inflation data

For the month, Fed’s preferred inflation gauge came in up 0.3% versus a 0.4% increase in January.

Still, Lori Calvasina – the head of U.S. equity strategy at RBC Capital Markets sees only limited upside in S&P 500 from here.

Some of our work suggests that gains may be tougher to come by from here and that the stock market needs a breather.

Her 5,300 year-end target suggests just 1.0% gain in the coming months. Note that the benchmark index has already raced more than 11% since the start of this year.

Fed will likely cut rates three times in 2024

The core PCE matched estimates for the year as well at 2.8% in February.

On Thursday, the Bureau of Economic Analysis also reported headline PCE at 2.5% for the year – also in line with forecasts. A 0.3% increase in headline PCE inflation for the month, however, was less than 0.4% expected. RBC’s Calvasina also wrote in a recent research note:

Looking through to year-end, we feel a bit more neutral than we have over the last few months, but we also feel very far removed from the bearish camp.

Today’s economic data arrives only days after the U.S. Federal Reserve left its key overnight borrowing rate unchanged but signalled three rates cuts before the end of 2024 as Invezz reported here.