Wall Street Today | PCE 3%, in Line with Inflation Expectations

The Dow Jones Industrial Average shot higher Thursday, hitting its highest intraday level of 2023, while the S&P 500 and Nasdaq wavered in the final trading day of November.

All three major U.S. stock benchmarks were on pace for their best month in at least a year, driven higher by falling U.S. bond yields, optimism about easing inflation, and potential Federal Reserve rate cuts next year.

“I think the market is getting it wrong,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company.

US equity futures opened up Thursday after the core PCE Price index rose in line with expectations in October at 0.2%, while personal income and consumption expenditures increased 0.2% for the month as expected. Including food and gas, the PCE index was 3%, the lowest price increase since inflation took off in April 2021.

Markets closely follow the PCE because the Federal Reserve has indicated monitoring the monthly report as a key inflation measure.

Meanwhile, the U.S. Labor Department reported Thursday that initial jobless claims rose to 218,000 in the week ending Nov. 25- in line with estimates- from 211,000 claims the week prior.

The Chicago Purchasing Managers' Index rose in November to 55.8 from 44.0 in October. And the Pending Home Sales Index fell less than expected, down just 1.5% vs 2% in October.

New York Fed President John Williams sees inflation toward the Federal Reserve's 2% target by 2025 because of restrictive monetary policy, normalizing supply and demand dynamics, and higher Treasury yields. But he's not yet ready to loosen the Fed's grip on the economy.

In prepared remarks delivered at a conference hosted by the Breton Woods Committee and New York Fed, Williams had his economic forecasts for the coming months and years:

"I expect it will be appropriate to maintain a restrictive stance for quite some time to restore balance fully and to bring inflation back to our 2% longer-run goal on a sustained basis," he said. "Despite a significant decline from a 40-year record, inflation is "still too high."

According to Bloomberg, oil futures climbed on Thursday after the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, agreed to reduce their monthly overall production by an additional 1 million barrels per day.

The news report said the reduction would be in addition to Saudi Arabia's much-anticipated extension of its voluntary reduction of the same size. The agreement has been made in principle and will still need to be voted on at the meeting later Thursday, delegates told Bloomberg.