S&P 500 Surges Above Key Level On Fed Chief Powell, But Inflation,

Dow Jones futures edged lower overnight, along with S&P 500 futures and Nasdaq futures. Salesforce.com headlined earnings overnight but investor focus will be on Thursday’s PCE inflation report after Fed chief Jerome Powell triggered a tech-led stock market rally on Wednesday.

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The pace of rate hikes could start to slow at the December meeting, Fed chief Powell said Wednesday, providing more-explicit support for a smaller increase at the upcoming meeting. But Powell stuck to his view that the fed funds rate will likely reach 5% or more. The current fed funds rate range is 3.75%-4%. Powell also noted that a lot of factors propping up inflation are easing. The Fed chief, who has suggested that a recession may be necessary, said a “soft landing” is still possible.

The Nasdaq led the way, with Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA) and Google parent Alphabet (GOOGL) all outpacing the composite. Notably, the S&P 500 index shot up to clear the 200-day moving average, a key resistance area.

On Thursday, investors will get the October PCE price index, with the November jobs report due Friday morning.

So while Wednesday’s action was encouraging, investors should await the market reaction to the Fed-critical data.

Key Earnings

Salesforce.com (CRM), Snowflake (SNOW) and Box (BOX) led a number of software earnings reports. Pure Storage (PSTG) and Victoria’s Secret (VSCO) also reported.

CRM stock fell solidly in overnight trade as Salesforce earnings topped but guidance was light. Co-CEO Bret Taylor will step down, leaving Marc Benioff as sole CEO. SNOW stock initially plunged in extended action on weak Snowflake revenue guidance, but pared losses considerably. Box stock was little changed as EPS just topped and sales slightly missed.

PSTG stock rose modestly overnight after Pure Storage topped Q3 views and raised guidance. Shares had closed down about 1% after plunging intraday on weak results and guidance from NetApp (NTAP). VSCO stock fell slightly as Victoria’s Secret earnings topped but sales fell just short.

Early Thursday, Dollar General (DG) and Kroger (KR) are on tap. Chinese EV makers Nio (NIO), Li Auto (LI) and Xpeng (XPEV) report November sales, with those stocks and other Chinese names surging Wednesday on Covid reopening hopes.

Inflation Report

The Commerce Department will release the PCE price index, the Fed’s favorite inflation gauge, at 8:30 a.m. ET as part of the income and spending report.

The October PCE price index should show a 0.4% increase vs. September. Year over year, PCE inflation should cool to 6% from September’s 6.2%. Core PCE, which excludes food and energy, is expected to be up 0.3%. The core PCE inflation rate is seen dipping to 5% from September’s 5.1%.

The PCE inflation report, along with the November jobs report Friday, will help shape Fed rate hike expectations. The November consumer price index will be released on Dec. 13, one day before the Fed’s December meeting announcement.

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