Daily Brief - February’s PCE Forecast

TLDR: Investors are on edge as the release of February's Personal Consumption Expenditure (PCE) price index approaches, scheduled for tomorrow at 08:30 AM ET.

This follows January’s report, which showed the headline PCE index at a 2.4% year-over-year increase, the lowest in nearly three years, and the core PCE at a rise of 2.8% from the previous year.

The focus on the upcoming PCE data stems from its potential impact on the Federal Reserve's interest rate decisions. Recent surges in the Consumer Price Index have reintroduced concerns, making the February PCE report critical. Markets currently lean towards a 70% probability of a rate cut by June, with expectations of 82 basis points of cuts by year-end.

Analysts expect a slight increase in annual PCE inflation to 2.5%, with monthly PCE inflation forecasted to rise to 0.4%, up from last month's 0.3%. Core metrics, excluding food and energy, are predicted to remain stable, with annual core PCE holding at 2.8% and monthly core PCE expected to decelerate to 0.3%, down from January's 0.4%.

A higher-than-expected PCE could reset expectations for interest rate cuts, likely impacting equities and other risk assets negatively. An in-line or lower PCE may bolster hopes for an imminent rate cut, potentially lifting market spirits.

Market Movers: US Sector Check

Here are the best and worst performing US sectors over the last month:

Top 3 performing sectors:

1. S&P Gold Miners - 18.06%
2. S&P Oil Equip - 12.31%
3. S&P Energy - 9.47%

Bottom 3 performing sectors:

1. S&P Autos & Components - -5.70%
2. S&P Telecom - -1.84%
3. S&P Health Care - 0.86%

Scenario Spotlight: What next for S&P Energy?

Over the past 82 instances where the S&P Energy sector experienced a monthly increase of 9.5%, historical data indicates a significant risk of decline in the following month.

Asset Spotlight: Energy Stock 💡

In the last 14 occasions where Cheniere Energy Partners' stock jumped, analysis from Toggle indicates a median decrease in the stock's price over the next 1 month.

Cheniere Energy Partners, a key subsidiary of Cheniere Energy, Inc., specializes in liquefying and exporting natural gas from its Sabine Pass LNG Terminal in Louisiana. It plays a crucial role in the global LNG market, supplying clean, secure, and affordable LNG to various customers worldwide, contributing to the shift towards more sustainable energy sources.