Gold, Wall Street wobbled as US core PCE disinflation stalled

·         The pace of disinflation of core PCE slowed down from around -0.16% on average in 2023 to -0.08% in 2024 (till July)

·         The Fed targets +1.5% of core PCE inflation and +2.5% of core CPI inflation average as +2.0% price stability mandate and 3.5% unemployment rate as maximum employment mandate

·         For the Fed’s dual mandate achievement, 6MA average US core inflation needs to be down by -100 bps and the unemployment rate by around -50 bps from current levels

·         Overall, if the US unemployment rate for Aug’24 falls back to around 4%, then the Fed may wait till Dec’24 for the start of rate cuts; if it surges over 4.3-4.5%, then may launch the rate cut cycle from Sep’24

On Thursday, Wall Street Futures closed mixed as real economy-heavy DJ-30 surged on soft landing optimism amid robust economic activities (Q2CY24 GDP) and softer than expected jobless claims data. But tech-heavy NQ-100 slid on a disappointing/mixed report card from AI tech bellwether Nvidia; broader SPX-500 also closed almost flat. On late Thursday, Wall Street Futures were also undercut by a CNBC report that Democrat Presidential Candidate and current US VP Harris may have a plan to impose capital gain tax even on unrealized stock gains (MTM) on super riches (net worth over $100M).

On Friday, some focus of the market was on U.S. Core PCE inflation, the Fed’s preferred gauze to measure underlying inflation trends. The BEA flash data showed U.S. annual (y/y) core PCE inflation (Seasonally Adjusted-SA) for July was unchanged at +2.6% from +2.6% sequentially, lower than the market expectations of +2.7% (?) and remained stalled at its lowest since Mar’21 (three years) for the three consecutive months (May-June-July). The US core PCE inflation now stalled at +2.6% since May after being stalled at +2.8% before that for three months (Feb-Mar-Apr’24).

On a sequential (m/m) basis (seasonally adjusted) the U.S. core PCE inflation increased by +0.2% in July against +0.2% in the prior month (unchanged) and is in line with market expectations of +0.2%. In July, although, the market expectations of annual (y/y) core PCE inflation was +2.7%, actually it should have been +2.6% if the estimate of sequential (m/m) rate was +0.2%. Thus in July, the US core PCE inflation was stalled at +2.6% and largely in line with the market estimate.

In July’24, the U.S. super core PCE service inflation ex Housing/Shelter, (the current focus of the Fed) eased to +3.3% from +3.4% (y/y), while the sequential (m/m) rate was unchanged at +0.2%. The US super core PCE inflation was around +2.0% in pre-COVID days.

Also, annual PCE inflation stalled at +2.5% in July’24 from +2.5% sequentially.

In July, goods PCE inflation ticked up to 0.0% from -0.1% and service inflation ticked down to +3.7% from +3.8%.

The Fed is now also watching Trimmed Mean Inflation, which also stalled at +3.3% in July’24 against +3.3% sequentially against +2.4% in pre-COVID days (Dec 19).

Overall, after the latest revisions, the 6M rolling average (6MRA) of US core PCE inflation was around +2.7% in July’24 against +2.8% in the prior month/report and +4.1% yearly average for 2023. The Q2CY24 average was around +2.6% vs the Q1CY24 average of +2.9%. Overall, for 2023, US core PCE inflation decreased from 4.9% to 2.9%; i.e. 2.0% over eleven months at an average disinflation rate of around -0.18% per month on average. In 2024, the US core PCE inflation further decreased from 2.9% in January to 2.6% in July; i.e. only 0.3% over six months; i.e. an average disinflation rate of around -0.05% per month.

The pace of disinflation in US core PCE inflation has been slowed down in 2024 from the unexpected pace in 2023. Overall, US core PCE inflation needs to go around +1.5% from present levels of +2.6%; i.e. around 1% for Fed’s price stability target. At present disinflation rate of -0.05% per month on average, it may take almost 20 more months; i.e. around Mar’26 for US core PCE inflation to fall around +1.50% on a sustainable basis. Thus Fed may look at least another quarter of data (Q3CY24) before gaining the required full confidence for launching the rate cuts cycle from Dec’24. The Fed is now gaining confidence incrementally, but not sufficient enough to go for launching the 11 rate cuts cycle from Sep’24 unless the US unemployment rate unexpectedly surges above 4.5% in Aug’24.

The Fed usually goes by a 6M rolling average (6MRA) of core PCE + core CPI inflation for any important policy move. As per the new series (2017 constant prices), the 6MRA core PCE inflation is now around +2.8% in June (vs +2.8% in the previous report), while the 6M rolling average of U.S. core CPI inflation is now around +3.6% (vs +3.7% in the previous report); i.e. 6M rolling average of US core inflation (CPI+PCE) is now around +3.2% (vs +3.3% in the previous report), still far above Fed’s +2.0% targets, but not very much above ideal 2.8-2.6% ‘full confidence building’ levels.

Although the Fed targets +2.0% core PCE inflation officially as a price stability mandate, in reality,/usually it’s +1.5% on average due to a 0.5% lower spread with core CPI inflation:

In the US, Core CPI (Consumer Price Index) and Core PCE (Personal Consumption Expenditures) are two different measures of inflation used to gauge price changes in the economy as well as any change in consumer consumption behavior after any meaningful change of prices (excluding food and energy prices due to their volatility).

The key differences between US Core CPI and Core PCE inflation are:

·         Core CPI measures the change in the prices of a fixed basket of goods and services purchased by households (out of pocket), while Core PCE measures the change in prices of variable goods and services consumed by individuals, both excluding food and energy

·         Core CPI focuses on the price changes of a fixed basket of goods and services typically consumed by urban households, while Core PCE has a broader scope, including all goods and services consumed by households, and adjusts for changes in consumer behavior in line with any significant changes in price (e.g., substitution effects)

·         The Core PCE, on the other hand, includes a broader range of expenditures. It accounts not only for out-of-pocket expenses but also for various goods and services paid for by third parties, such as employer-provided health insurance. This means that the PCE captures a wider array of consumer spending and includes expenditures by non-profit institutions as well.

·         The CPI uses a specific Laspeyres formula, which is based on a fixed basket of goods. This means it does not adjust for changes in consumer behavior in response to price changes. For example, if the price of beef rises, the CPI does not account for consumers switching to chicken.

·         The PCE employs a Fisher ideal index formula, which allows for substitutions between items as their relative prices change. This flexibility typically results in a smoother inflation rate, as it reflects changing consumer preferences more accurately. For example, if the price of beef rises, the CPI does not account for consumers switching to chicken, but the PCE does

·         The weights assigned to different categories in the CPI are based on a fixed survey of consumer spending patterns. These weights are updated less frequently, which can lead to discrepancies over time as consumer behavior shifts.

·         The PCE updates its weights more regularly based on current expenditure data, reflecting more recent consumer spending habits. This results in a more dynamic representation of inflation as it adapts to changes in consumption patterns.

·         Historically, the Core CPI tends to report higher inflation rates compared to the Core PCE. For instance, since 2000, the average annual PCE inflation has been about 0.4% points lower than that of the CPI. This difference can be attributed to the broader scope and more adaptive nature of the PCE, which captures the effects of consumer substitution more effectively.

·         Both the Core CPI and Core PCE are essential for understanding inflation trends in the U.S. economy.

·         The Fed prefers Core PCE because it provides a more comprehensive view of inflation and better captures changes in consumer behavior.

Moreover, ahead of Nov’24 election, several US Senators/Congress members, both Democrats and Republican Presidential nominees (Harris and Trump) are not very happy about still elevated inflation compared to pre-COVID levels, still up by at least +20%, and insisting that Fed/Powell should focus on core CPI inflation rather than core PCE inflation, which is around 1.0-0.5% lower most of the times due to composition/weightage issue; ordinary people (vote bank) are worried about overall inflation (CPI), especially for daily essential goods & services, which is still significantly elevated than pre-COVID levels, while their real earnings may be still flat.

Powell also publicly acknowledged to a Senator in the last hearing/testimony (Mar’24) that US Congress officially mandated the Fed to maintain price stability mandate as +2% headline inflation (CPI), not PCE, which is always the lowest among various inflation gauzes. Powell pointed out that the Fed is now actually targeting core CPI inflation around +2.0%; say +/- 0.25% on a sustainable basis due to lower volatility, which is still higher than headline CPI due to the exclusion of volatile food & fuel/energy components.

Overall, core PCE inflation is now a lagging inflation indicator, and does not impact the market meaningfully/significantly as the market already has an idea/estimate about the level after core CPI and PPI data, released almost 2-weeks ago. Powell is under pressure by both Democrats and Republicans for various issues including still elevated inflation and also increasing unemployment.

Although the Fed generally targets +2.0% core PCE inflation as the price stability (inflation) target, in reality, it maintains that around +1.5%, which is equivalent to core CPI inflation targets around 2.0-2.25%. Before COVID, the Fed started cutting rates in late 2019 amid repo market disruptions (due to excessive QT) from Aug’19 (after Trump blasted out Powell), when 6MRA of core PCE inflation was around +1.6% and core CPI inflation was around +2.0%. Fed had cut rates from +2.50% to +1.75% in H2CY19 (pre-COVID).

Fed generally targets a 6M rolling average core PCE inflation rate of around +1.7% and +2.3% core CPI inflation on a sustainable basis; equivalent to +2.0% price stability core inflation targets on an average (1.7+2.3). The average US core inflation (CPI+PCE) was 5.2% in Jan’23, fell to 3.4% in Jan’24 and a further 2.9% in July’24, while the 6MRA was around 3.1%. Thus overall, average US core inflation (CPI+PCE) now needs to further fall by around -1.0% for the Fed’s 2% price stability targets. And at the current R/R of -0.08% per month, it may take 12-15 months more to have the Fed’s price stability targets of 2% core inflation on a sustainable basis by Sep-Dec’25.

The average rate of core disinflation was around -0.16% in 2023, which is now reduced by almost half to -0.08% in 2024. In 2023, the rapid pace of disinflation was due to the easing of the supply chain/constraints and also the supply of more workers/labor force amid huge immigration (legal/illegal). But the main effect of those easing in the supply chain (goods & labor/service) may be already over by 2023 (after withdrawal of all types of COVID restriction by late 2022) and thus we are now seeing comparatively slow, but predictable disinflation, although often stalled. Goods inflation is again ticking up amid higher demand from increasing population/immigration; also demand for housing, especially rented homes is high and also resulting in elevated rent/housing inflation.

Due to the slower rate of disinflation in 2024, the Fed is still not confident enough to start the rate-cuts cycle. That’s why Powell/Fed is now pointing out that although there is incrementally additional confidence in the last QTR (Q2CY24), it’s not enough still now. Although there was a rapid disinflation rate in H2CY23, the same was stalled in H1CY24. Thus Fed may now observe actual data in Q3CY24 and the outlook thereof for any policy rate cut decision from Dec’24.

But in the meantime, if the US unemployment rate unexpectedly/suddenly jumped above the 4.5% red line in Aug’24, just ahead of the Nov’24 election, then the Fed may have no other option but to start cutting rates by -0.25% from Sep’24 QTR to pacify Wall Street, Main Street and also Capitol Hill, although there may be no material difference on the overall employment situation, whether Fed starts cutting rates from Sep’24 or Dec’24.

On Thursday, some focus was also on U.S. jobless claims (seasonally adjusted), which serves as a proxy for the unemployment trend/overall labor market condition. After July’s unexpected unemployment rate surge to 4.3%, the Fed is now focused more on the unemployment mandate, although now the Fed needs to lower both the unemployment rate and average core inflation (CPI+PCE) by around -1.0% for its dual mandate of maximum employment (~3.3%) and price stability (+2.0% core inflation) on a durable basis.

On Thursday, the U.S DOL flash data showed the number of Americans filing initial claims for unemployment benefits (UI-under insurance) eased to 231K in the week ending 24th August from 233K in the previous week, and in line with the market expectations of 231K. In the U.S., Initial jobless claims refer to the number of people who have filed for unemployment benefits with their state's unemployment agency for the first time during a specific reporting period, typically every week.

The 4-week moving average of initial jobless claims, a better indicator to measure underlying data, as it removes week-to-week volatility, also eased to 231.50K on the week ended 24th August from 236.25K in the previous week.

The continuing jobless claims (UI) in the U.S. rose to 1868K in the week ending 17th August, from 1855K in the previous week, and lower than the market expectations of 1870K. The 4-week moving average was 1863.250K, from the previous week's average of 1863.500K and the highest since late Nov’21 (around 1928K). The advance seasonally adjusted insured unemployment rate for the related week was unchanged at 1.2%. Overall, insured US continuing jobless claims are now above +1000K from pre-COVID (Feb’20) levels of 1760K.

The continuing jobless claims number is a proxy for the advance numbers of seasonally adjusted insured unemployed persons for the week. The continuing jobless claims in the U.S. measure unemployed people who have been receiving unemployment benefits for a while/ more than a week or filed for unemployment benefits at least two weeks ago (under UI),

 

Overall, as per seasonally unadjusted continuing jobless claims under all categories (UI) of around 1921K (4-week moving average) and assuming average uninsured employees (not getting any UI benefit) of around 4802K (usually 2.5 times of 4WMA seasonally unadjusted continuing jobless claims), estimated unemployed persons was around 6723K in Aug’24 against 7163K sequentially.

Assuming the muted addition of the labor force in Aug’24 (after an unusual addition of +420 K in July due to some exceptional factors against average R/R +200K), the headline unemployment rate should come around 4.0% in August against 4.3% in the prior month.

On Friday, the University of Michigan (UM) final data showed US consumer sentiment for the US was revised higher to 67.9 in August from a preliminary reading of 67.8, and 66.4 sequentially but below market expectations of 68.0. The current economic conditions gauge was revised higher to 61.3 from 60.9 while the expectations index was unchanged at 72.1.

The UM final data shows US year-ahead (1Y) inflation expectations were revised down to +2.8% in August, the lowest since Dec’20, compared to an earlier estimate of +2.9% and easing from +2.9% in the prior month, in line with actual CPI data for July’24. But the five-year (5Y) inflation expectations remained steady for the 5th straight month at +3.0% in August, in line with the flash estimate.

The UM said:

“Consumer sentiment confirmed its early-month reading; after drifting down for four months; sentiment inched up 1.5 index points above July and is currently 36% above the all-time historic low from June 2022. Consumers’ short- and long-run economic outlook improved, with both figures reaching their most favorable levels since April 2024 and a particularly sizable 10% improvement for long-run expectations that was seen across age and income groups.

Sentiment this month reflects a slight rise in sentiment among Independents, as Democrats and Republicans offset each other almost perfectly. Democrats exhibited a large 10% increase in sentiment while Republicans posted an equally sized decline. These patterns resulted from a sea change in election expectations this month with Harris emerging as the Democratic candidate for president. In July, 51% of consumers expected Trump to win the election versus 37% for Biden. In August, election expectations flipped; 36% expected Trump to win compared with 54% for Harris. Economic and election expectations are both subject to change as election day approaches.”

Overall, the US consumer sentiment is increasing led by mainly Democrat supporters amid the increasing probability of a Democrat win led by Harris after the exit of Biden against Trump (Republicans).

Conclusions:

Most of the FOMC Policy makers are still in wait & watch mode to be more confident about launching the 11-QTR rate cut cycle from Dec’24 rather than Sep’24 and also not ready to accept the US labor/job market recession despite July’s terrible and 2024 negative revision for NFP. But at the same time, most Fed officials are also taking a cautious tone about increasing the unemployment rate, which unexpectedly surged to 4.3% for some transient reasons. But overall, the 2024 YTM average of the US unemployment rate was 3.9% in July against 3.6% both in 2022 and 2023. In May’19 (pre-COVID normal economy without any repo market crisis), the US Fed repo rate was +2.5%, at neutral levels against core PCE inflation of around +1.5% (around price stability targets) and unemployment rate 3.6% (around maximum employment levels).

Now In July’24, the US Fed repo rate stands at +5.50% (moderately restrictive), against core PCE inflation of +2.6% (still around 1% above the price stability target of +1.5%) and unemployment rate of 4.3% (around 0.8% above from maximum employment levels 3.5%). But the Fed usually goes by at least a 6M rolling average of data basis rather than 1-3 months unless there is an exigency/crisis and issue of financial stability. As of July’24, the 6M rolling average of Fed repo rate +5.50% against core PCE inflation +2.7% (around 1.2% above price stability target of 1.5%), and unemployment rate 4.0% (above +0.5% from maximum employment target of 3.5%).

Thus there is space/scope for the Fed to wait at least till Nov’24 to launch the next rate cut cycle of 11 QTR rate cuts @0.25% from Dec’24 till Dec’27 (from +5.50% to +2.75%), so that the Fed can hit the dual mandate goal post of around +1.5% core PCE inflation (+/- 0.3%) along with unemployment rate around 3.5% (+/- 3%) on a sustainable basis in an orderly manner without causing any recession (hard landing) and keeping the goldilocks nature of the US economy in place.

Although the Fed is nervous/worried to some extent after the unemployment rate surged to 4.3% in July unexpectedly, it may be also a case of transitory factors and the headline unemployment rate may also soon fall below 4.0% in the coming months (as per US jobless claims trend for the last few weeks). Fed is also of the opinion that the increase in the headline unemployment rate is mainly due to the increasing labor force/number of workers/immigrants flocking US legally/illegally from developing countries in hopes of a better standard of living. Till now there have been no widespread layoffs in the US for any reason, but available jobs (open positions) have decreased from very high to normal levels (pre-COVID) due to the increasing labor force. The Fed may not decide about the Sep’24 rate cut or hold without evaluating the Aug’24 job and core inflation data in totality. Thus despite growing probability, the Sep’24 rate cut is not a done deal.

But if Aug’24 US unemployment rate again surges above 4.3-4.5%, then the Fed may act in Sep’24 to pacify Wall Street, Real Street and also Capitol Hill/White House; the Fed is now under huge pressure from renewed financial journalists and even some analysts to cut rates at -50 bps pace for each QTR to avoid a hard landing after keeping rates at ‘abnormally high’ levels for over 12-months. Thus in that scenario, for the sake of employment, price and financial stability, the Fed may start cutting rates by -25 bps every QTR end (eleven times) from Sep’24 till Dec’26 and then one half-yearly cut (June 24) in 2027.

In the alternative scenario, if Aug’24 US unemployment rate falls back to around 4.0% along with an unsatisfactory rate of disinflation, then the Fed may also choose to wait & watch for more data till at least Nov’24 and then start cutting rates eleven times @-25 bps each QTR end till Dec’26 and two more either in H1/H2CY27 or Q1/Q2CY27.

The market is still now expecting a -50 bps Fed rate cut each in Sep’24 and Dec’24, but the Fed may eventually cut -50 bps (Sep+Dec’24@-25 bps each) or even only -25 bps in H2CY24 (Dec’24). Fed may also want to avoid any unnecessary political controversy by going for rate cuts just before the US election as Trump (Republican) has already issued a warning for Fed/Powell not to help the incumbent Biden admin (Democrats) in this way.

We should also remember that Fed Chair Powell was appointed by Trump after an ‘episode of extensive interview sessions’ with various other potential candidates including Yellen (a known Democrat supporter). Although Powell may not be a core Democrat supporter, he may be sympathetic towards Republicans despite being heavily trolled by Trump for his dual tightening strategy (QT+ rate hikes) during his 1st term in the White House, allegedly causing the Sep’19 US repo market crisis, forcing Fed to launch a mini QE and then rate cuts even before COVID.

During Trump 1.0, the main control of the market was in the hands of Trump thanks to his trade/sold war strategy with China and even various NATO/EU allies and frequent bellicose comments coupled with the war of words (rhetorics only) with NK Leader Kim (to play with hell/nukes) to sell more military weapons to Japan and SK. Trump was also very active on China's Taiwan issues to sell more military equipment to the latter, while somehow sympathetic with Russia/Putin and even suggested including Russia in the G7. But Trump never incited any real war like Biden (Russia-Ukraine and Gaza war), while was very much instrumental in withdrawing US military force from Afghanistan and Iraq/Middle East to cut growing US deficits.

In this way, during Trump 1.0, the market was always on edge due to his frequent comments/narratives on China. Trump also actively controlled global oil price movement through his frequent jawboning like sanctions on Iran, action on Saudi Arabia for cartelization and higher production/fracking by the US. The control of the market was not in the hand of Fed/Powell until late 2019 when the Fed’s dual tightening caused the late 2018 US repo/money market crisis and Trump’s trade war/subsequent forced trade agreement with China caused strained relations between the two superpowers of the world.

In any way, during Trump 1.0, Fed/Powell hiked the repo rate from +0.75% (Dec 16) to +2.5% neutral rate by Dec’18 and stayed there till June’19. From July’19, the Fed again started cutting rates and reached +1.75% by Oct’19 amid the repo/funding market crisis due to dollar/USD scarcity as the Fed was not buying any US bonds actively to supply USD liquidity to banks, while big banks led by JPM also refused to lend smaller ones or even each other. By Mar’20, COVID started to spread /all over the world and the Fed cut the rate to +1.25% then after a few weeks, cut fully to +0.25% by mid-Mar’20 in an emergency meeting when COVID was announced as a global pandemic by WHO.

Trump accused China of intentionally causing and spreading COVID all over the world/US to ke ‘revenge’ against his nationalistic/trade war strategy. Trump trade war tantrum, COVID, Russia-Ukraine war and subsequent global trade bifurcations (China/Russia/Iran vs US/EU/West), supply chain issues, COVID-related restrictions on the labor force, huge fiscal and monastery stimulus to fight COVID recession eventually caused elevated and sticky inflation. Fed also made a policy mistake of staying at an almost zero rate (+0.25% repo rate) for too long-24 months (Mar’20 to Feb 22) by assuming the hot inflation was purely ‘transitory’.

Then the Fed started hiking rates from Mar’22 (0.25%) and reached +5.50% by July’22 and now staying there for almost 14 months. Fed is now cautious about previous policy mistakes by not cutting rates at an appropriate time to avoid a hard landing/recession/economic slowdown. Fed now does not want to cut rates too early or too late.

During Trump 1.0, although US core PCE inflation was hovering around 1.5-2.0% on average and not overheated, the Fed chose to hike rates along with QT and normalize to get itself ready for the next financial crisis, so that the Fed could again cut rates to almost zero with another round of QE. Fed will not cut reverse repo rates below zero into negative territory unlike the ECB and BOJ to stimulate the economy during a financial crisis. ECB and BOJ’s so-called NIRP strategy for years caused deflation and may have also stagflation.

Also, as the largest holder of US TSY bonds, theoretically Fed is in huge MTM loss for its HTM (held to maturity) bond portfolio during the rate hikes cycle as bond prices tend to go upwards and yields lower during this cycle. Fed will be in notional profit for its HTM bond portfolio when bond prices go upwards and yields lower during the rate cuts cycle. the same is also true for banks & financials, holding meaningful amounts of US TSY bonds.

Fed is now also doing QT (financial tightening); which is opposite to rate cuts (financial easing). Although theoretically, it’s absurd to go for rate cuts and QT at the same time, the Fed believes that it will reduce overall restrictiveness in a reduced/balanced way rather than only rate cuts (without QT). During the pre-COVID era, especially in 2019, when Fed was doing QT, it may have sucked excessive USD finding liquidity, resulting in a frequent surge in SOFR (Secured Overnight Financing rate) above reverse repo rate. In any Central Bank including the Fed, the target of the monetary policy is to align the SOFR with the reverse repo rate. For example, now the Fed SOFR is almost stable around 5.30-5.35% (~5.333%) against the Fed’s reverse repo rate of +5.40%. Banks generally lend to each other against US TSY bond collateral at SOFR. Thus SOFR is vital for funds for Banks & Financials.

In Sep’19, SOFR surged to a high of +5.40% against the then revered repo rate of +1.90%, causing financial stability panic; the Fed was forced to abandon QT and launch mini QE for the sake of financial stability. After the repo market tantrum, the Fed introduced various LAF (liquidity adjustment facility) instruments including overnight reverse repurchase agreement (ON RRP) to manage the financial stability mandate, As the Fed’s Balance Sheet (B/S) is now approaching 25% of the estimate US nominal GDP (2025), recently there were some minor spikes in SOFR. In late 2019, the Fed’s B/S went below 20% of the US nominal GDP, causing the infamous repo/money market tantrum.

Now, in 2024, the Fed is QT tapering modem while its B/S is approaching $6.50T by Dec’24 (post COVIV levels), which would be around 22% of the estimated US nominal GDP of around by Dec’24 or H1CY26. Ideally, the Fed should stop the QT at B/S size around $6.50T and then go for rate cuts by Dec’24. The world’s most important central bank Fed shouldn’t take contradictory tools by opting for rate cuts at a time when QT is going on (even at a reduced pace-QT tapering).

 

Market wrap:

On Friday, Wall Street Futures wobbled after data showed US core PCE disinflation again stalled in July but recovered in the late session on month-end portfolio rebalancing and value buying. Also, softer than expected US/UM 1Y inflation expectations, better than expected US/UM consumer confidence, and stable US jobless claims indicating a 4% unemployment rate in Aug’24 (from 4.3% in July) may be indicating a soft landing for the US economy, rather than hard landing while restoring the price stability mandate. Dow Future stumbled from around 41600 to almost 41200 soon after the US core PCE inflation data but eventually recovered again to 41673 and closed around 41640, surging over +200 points, while SPX-500 surged around +1.0% and NQ-100 gained +1.3%. For August, blue chip DJ-30 gained around _2.00%, while tech-heavy NQ-100 and broader SPX-500 surged around +4.00% each.

On Friday, Wall Street was boosted by consumer discretionary, industrials, techs, materials, real estate, banks & financials, communication services, consumer staples, healthcare, utilities, and energy to some extent. Scrip-wise, Wakk Street was boosted by Intel, Amazon, IBM, 3M, Verizon, Caterpillar, JPM, Walmart, Caterpillar, JPM, Walmart, J&J, Microsoft, P&G, Boeing and Amgen, while dragged by Salesforce, American Express, Aplem United Health and Nike.

Oil stumbled after a report that OPEC+ may hike production levels in the coming months. Gold also stumbled from around 2527 to almost 2493 before recovering slightly around 2503 amid increasing geopolitical tensions between the Gaza war and the Russia-Ukraine war.

On the weekend, the US said there was meaningful progress for the Gaza war ceasefire at the Doha meeting and Israel's PM Netanyahu is also under huge public pressure for a ceasefire and hostage deal. Elsewhere, Ukraine is now frequently attacking deep into Russian territory with US-made missiles and drones, which may cause serious miscalculations by both sides.

Weekly-Technical trading levels: DJ-30, NQ-100, SPX-500, and Gold

Whatever the narrative, technically Dow Future (41260) has to sustain over 41500 for any further rally to 41650/41750*-41950/42100* and 42700/41900-43050/44250-44500/44800 in the coming days; otherwise sustaining below 41450, DJ-30 may again fall to 41000/40700-40500*/40300 and 40150/40000*-39700/39450 and further 39350/39200-39100/38900 and 38500*/38300-38000/37600 in the coming days.

Similarly, NQ-100 Future (19790) has to sustain over 20100-20200 for any further rally to 20300*/20600-20800/21050* and further to 21300/21700-21900/22050 and even 23000 levels in the coming days; otherwise, sustaining below 20050. NQ-100 may again fall to 19750/19650*-19550/19400 and 19300/19100-18800/18700* and further 18550/18450-18200/17950 and may further fall to 17650/17450-17300/17000 in the coming days.

Technically, SPX-500 (5650), now has to sustain over 5700 for any further rally to 5725/5750*-5850*/5900 and 6000/6050 and 6100/6150 in the coming days; otherwise, sustaining below 5650 may again fall to 5575/5550-5450/5400* and 5440/5300-5250/5100* and further 5050/4950*-4850/4750 and 4550/4450-4350*/3850 in the coming days.

Also, technically Gold (XAU/USD: 2510) has to sustain over 2540 for a further rally to 2560*/2575-2600/2650 in the coming days; otherwise sustaining below 2535-2520, may fall to 2490/2480-2460/2445* and 2435/2420-2410/2400 and further to 2375/2350*-2325/2300 in the coming days.