PCE Becomes the Market’s Reality Check 05/12/2025

HOT stories for today

Market wrap:

• US equities eked out a gain on Thursday, with the S&P 500 edging closer to its record and finally shaking off November’s drag. The benchmark index moved within roughly 100 points of an all-time high, though the advance came on mixed economic signals. Labor-market readings were contradictory. Initial jobless claims fell to a three-year low, echoing Wednesday’s ADP report showing the weakest private-sector hiring in three years. Meanwhile, Challenger, Gray & Christmas reported 71,231 announced layoffs in November, the highest since 2022, and noted that 2025 is already tracking the most cuts since the early pandemic.
• Investors are now squarely focused on next week’s Federal Reserve decision. Bond markets are increasingly pricing in uncertainty around former President Trump’s pending Fed nomination, whether Kevin Hassett or another pick, amid fears the incoming member could push for rate cuts that are either too aggressive or too restrained. Friday brings the final data release before the FOMC meeting: a three-month-old inflation print from September. Bitcoin trimmed earlier gains, Treasury yields ticked higher, and Meta rose after CEO Mark Zuckerberg scaled back spending tied to the company’s metaverse ambitions. Asia-Pacific equities slid following Wall Street’s muted session, while US stock futures were little changed ahead of the PCE price index due after the opening bell.

PCE Becomes the Market’s Reality Check

• US stocks are back within sight of record highs, but anxiety over sticky inflation and a cooling labor market is keeping sentiment fragile ahead of next week’s Fed decision. That’s why Friday’s long-delayed September PCE report — the central bank’s preferred inflation gauge- has become a critical barometer for markets. Economists expect headline PCE to rise 0.3% and core to increase 0.2%, with annual rates holding at 2.9% and 2.8%. After weeks of conflicting signals,  slowing hiring and weaker surveys on one side, resilient corporate earnings and strong Black Friday spending on the other, investors are hoping PCE offers a clearer read on the economy. 
• “Soft data has been so inaccurate,” said Mark Hackett of Nationwide. “PCE starts filling in the blanks at a moment when investors need something reliable.” Despite lingering inflation, Fed-funds futures imply an 87% chance of a quarter-point cut next week as policymakers prioritize support for a weakening job market. Inflation is likely to stay “sticky, not surging,” said Natixis strategist Jack Janasiewicz, who expects cooling labor demand to ease price pressures gradually. If PCE shows consumers are still holding up, the year-end equity rally could get fresh momentum.

Stocks on the move:

• Ulta Beauty (ULTA): Shares rose nearly 6% after the beauty retailer topped fiscal third-quarter expectations and raised full-year guidance. Ulta now sees revenue of $12.3 billion, up from a prior $12.0–$12.1 billion range and ahead of the $12.13 billion consensus. Same-store sales growth is projected at 4.4%–4.7%, above the earlier 2.5%–3.5% outlook.
• Hewlett Packard Enterprise (HPE): Shares fell about 8% after the company missed fourth-quarter revenue estimates. HPE reported $9.68 billion in revenue versus the $9.94 billion expected by LSEG-polled analysts, though earnings topped forecasts.
• SoFi Technologies (SOFI): The stock dropped more than 5% after the company announced an underwritten $1.5 billion public offering of common shares.
• Docusign (DOCU): Shares slipped nearly 3% even after the company raised its full-year sales outlook alongside third-quarter results. Adjusted EPS came in at $1.01 with revenue of $818.4 million, ahead of FactSet estimates of 92 cents and $806.2 million.
• SentinelOne (S): Shares fell nearly 8% after the cybersecurity firm projected fourth-quarter revenue of $271 million, slightly below the $273 million expected by LSEG. Full-year revenue guidance was reaffirmed at $1 billion, and third-quarter results exceeded consensus.

Watchlist: ULTA, DOCU, S, HPE, SOFI, RBRK, SNOW, VSCO

Key Economic Events Today:

EST time

10:00 am: USD Core PCE Price Index
10:00 am: USD Inflation Expectations
10:00 am: USD Consumer Sentiment


Earnings

BMC (Before Market Open): Victorias Secret (VSCO), KNOT Offshore (KNOP)


The TEFS Analyst team wishes you a successful day!