Tuesday marked another choppy day for stocks as investors looked ahead to this week's key inflation update and the impact it may or may not have on the Fed's plans for interest rates. Not helping the skittishness was a pair of disappointing economic reports, though two of the three main benchmarks still managed to turn higher by the close.
It's unlikely that the Personal Consumption and Expenditures (PCE) index has ever been more anticipated. True, the data, which tracks consumer spending, is the Fed's preferred measure of inflation, but markets usually focus more on the Consumer Price Index (CPI). However, after the latest CPI and Producer Price Index (PPI) reports came in higher than expected, the January PCE index is now the most-anticipated event of the week.
Another hot inflation reading could continue to lower the odds the Fed will cut rates sooner rather than later. According to CME Group's FedWatch Tool, futures traders have pushed back the chances for the Fed's first quarter-point rate cut to June. About a month ago, most folks were anticipating the first cut to happen at the March meeting.
Durable goods, consumer confidence come in worse than expected
As for today's economic calendar, durable goods fell by a more-than-expected 6.1% in January as orders for commercial planes plummeted 59%. Economists were expecting durable goods orders to fall 5%. Excluding aircraft and automobiles, core orders were up 0.1%.
Separately, data from The Conference Board showed its Consumer Confidence Survey fell to 106.7 in February from January's downwardly revised 110.9 reading. This was below the 115.1 economists were anticipating.
"The decline in consumer confidence in February interrupted a three-month rise, reflecting persistent uncertainty about the U.S. economy," said Dana Peterson, chief economist at The Conference Board, adding that inflation, the U.S. political environment and a tight labor market were consumers' main concerns.
Viking Therapeutics more than doubled on positive weight-loss drug data
In single-stock news, Viking Therapeutics (VKTX, +121.0%) stock more than doubled today after the drugmaker revealed positive Phase 2 results for its weight-loss treatment. While VKTX shares surged, though, two market leaders in the obesity drug space – Eli Lilly (LLY, -0.9%) and Novo Nordisk (NVO, -1.0%) – declined.
Elsewhere, Macy's (M) rose 3.4% after the department store chain reported higher-than-expected fourth-quarter earnings. The company also said it will close 150 underperforming Macy's stores and open 15 new Bloomingdale's stores and 30 new Bluemercury locations as part of a new strategy to stimulate growth.
Lowe's rises despite weak guidance
Lowe's (LOW, +1.8%) was also on the earnings calendar. The home improvement retailer beat on both the top and bottom lines. Still, both figures were lower on a year-over-year basis amid "a slowdown in do-it-yourself (DIY) spending and unfavorable January winter weather," said Lowe's in a press release.
The company also gave weaker-than-expected full-year guidance. In the earnings call, Lowe's CEO Marvin Ellison said that "it's difficult to predict" when home improvement demand will pick up. In addition to consumers showing a preference to spend on services, "existing home sales are at levels we've not seen in almost 30 years," Ellison noted.
He expects "DIY demand to remain under pressure" considering "two-thirds of homeowners remain locked in at rates below 4%, which may keep many on the sidelines."
As for the major indexes, the Dow Jones Industrial Average finished 0.3% lower at 38,972, while the S&P 500 (+0.2% to 5,078) and the Nasdaq Composite (+0.4% at 16,035) finished with modest gains.
