Weekly Market Outlook: U.S. August PCE and Fed Officials' Speeches in Focus

TradingKeySep 23, 2024 8:54 AM

TradingKey - This week, financial markets will be closely watching key data releases, with the U.S. August PCE Price Index—considered the Fed's preferred inflation indicator—taking center stage. Additionally, several Fed officials, including Chair Powell, FOMC permanent voter and New York Fed President John Williams, Atlanta Fed President Raphael Bostic, and Minneapolis Fed President Neel Kashkari, are scheduled to speak. U.S. September manufacturing PMI and Q2 GDP will also attract investor attention. Meanwhile, Micron Technology (MU-US) is set to release its earnings, which may trigger significant stock price fluctuations.

Last week, the Fed announced a 50 basis point cut in the federal funds rate target range, lowering it to 4.75%–5%. This marks its first rate cut since March 2020 and signals a shift from the tightening cycle to an easing cycle. U.S. inflation continues to cool, with August CPI rising 0.2% month-on-month and 2.5% year-on-year, marking the fifth consecutive month of year-over-year declines and the smallest increase since February 2021. The market widely expects further rate cuts this year.

Furthermore, Oracle (ORCL.US) has seen its stock rise 60% this year, largely driven by AI demand. Its better-than-expected Q1 earnings and guidance that sales will double over the next five years have further boosted investor confidence.

Key Economic Events to Watch This Week

U.S. August PCE

This Friday, the U.S. August PCE Price Index will be released. In July, PCE remained unchanged at 2.5%, while core PCE held steady at 2.6%, both staying above the Fed's 2% target.

Economists expect the August PCE Price Index to rise by just 0.1% month-on-month for the second time in three months. Year-on-year, it is expected to increase by 2.3%, the smallest annual gain since early 2021.

The slowdown in year-on-year inflation reflects lower energy and food prices, as well as a deceleration in core costs. Economists expect core PCE, excluding food and fuel, to rise by 0.2% month-on-month for the third consecutive month.

Powell and Fed Officials Set to Speak

Last week, the Fed cut rates by 50 basis points to 4.75%–5%, its first cut since March 2020.

Investors will closely watch this week's speeches by Fed officials. According to the CME's "FedWatch Tool," the market is pricing in a nearly 70% chance that the Fed will cut rates by at least another 75 basis points in 2024.

On Thursday at 9:20 AM U.S. Eastern Time, Fed Chair Powell's pre-recorded remarks will be played at the event. Additionally, on Monday, FOMC voter and Atlanta Fed President Raphael Bostic will speak on the economic outlook, while FOMC voter and Chicago Fed President Austan Goolsbee will participate in a fireside chat. New York Fed President John Williams, Fed Governor Michael Barr, Minneapolis Fed President Neel Kashkari, and Boston Fed President Susan Collins are also scheduled to speak throughout the week.

Micron Releases Q4 FY24 Earnings

In its last earnings, Micron posted Q3 revenue of $6.81 billion, an 81.6% increase from $3.75 billion in the same period last year, beating analysts' expectations of $6.67 billion and exceeding the previous quarter's revenue of $5.82 billion. While the guidance met market expectations, it was not overly impressive, causing Micron's stock to drop more than 9% in after-hours trading.

Micron expects Q4 revenue to range between $7.4 billion and $7.8 billion, with the midpoint roughly in line with analysts' expectations of $7.58 billion. The company also projects EPS of $1.08, compared to the market expectation of $1.02.

Major Events:

Monday: U.S. September S&P Global Manufacturing PMI (Preliminary)

Tuesday: U.S. September Conference Board Consumer Confidence Index, Reserve Bank of Australia Rate Decision

Friday: U.S. August Core PCE Price Index (YoY)

Key Economic Data:

Monday: FOMC voter and Atlanta Fed President Raphael Bostic speaks on the economic outlook. FOMC voter and Chicago Fed President Austan Goolsbee participates in a fireside chat.

Tuesday: Bank of Japan Governor Kazuo Ueda meets with Osaka business leaders and delivers a speech. Reserve Bank of Australia Governor Michele Bullock holds a monetary policy press conference.

Wednesday: Fed Chair Powell delivers pre-recorded remarks at an event. Fed Governor Michelle Bowman speaks on the economic outlook and monetary policy.

Key Earnings Reports:

Wednesday: Micron Technology (MU.O)

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