U.S. PCE data today: does S&P 500 have any upside left?

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 April.

S&P 500 outlook after PCE inflation data

For the month, Fed’s preferred inflation gauge came in up 0.2% down from 0.3% in March.

The inflation data bodes well for the S&P 500 that Brian Belski - the chief investment strategist at BMO Capital Markets now expects will climb further in the back half of 2024.

His 5,600 year-end target suggests potential for another 7.0% gain from here. The benchmark index is already up well over 10% versus the start of this year.

Is the S&P 500 outlook based on rate cuts?

The core PCE came in at 2.8% for the year this morning - up slightly versus 2.7% expected.

On Friday, the Bureau of Economic Analysis also reported headline PCE at 2.5% for the year and 0.3% for the month – both in line with forecasts. On CNBC's "Halftime Report", BMO Capital's Belski also said:

Other notable data in today's update include personal income that popped 0.3% in April - in line with estimates. A 0.2% increase in spending came in shy of 0.4% expected.

When will the Fed begin cutting rates?

Treasury yields moved lower following the core personal consumption expenditure price index data on Friday.

Chris Larkin of Morgan Stanley expects the market to read the data as positive but recommends that investors remain patient. In a statement this morning, he added:

The U.S. Federal Reserve is scheduled for its next policy announcement on June 12th. Ahead of it, the S&P 500 is trading just below its all-time high of over 5,300 level.