The Eye-Popping Numbers Driving the Markets

All eyes will be on the last big data release of the year today, the Personal Consumption Expenditures report.Credit…Lucas Jackson/Reuters

What to watch in Friday’s inflation report (and beyond)

The final big test of the year for investors is set to arrive on Friday with the release at 8:30 a.m. Eastern of the Personal Consumption Expenditures report, the Fed’s preferred inflation gauge.

It’s been a banner year for markets. Investors shrugged off high inflation and rising interest rates, sending the S&P 500 up more than 23 percent as of Thursday’s close.

Can it keep going? Here are some other big numbers from the past year, and what’s to come:

3.3 percent: According to Reuters, market participants expect Friday’s reading for the core measure of P.C.E., which strips out food and fuel, to have risen by 3.3 percent on an annualized basis. That would be a decent improvement on last month’s figure and give the Fed more flexibility to lower interest rates next year.

152: The rate-cuts discussion has gone global — even if the Fed is one of the only major central banks talking openly about the prospect. Michael Hartnett, an investment strategist at Bank of America, predicts a rate-cut bonanza — 152 in all. It will be the first year since 2020 in which “cuts outpace rate hikes,” he wrote in an investor note last week. BofA also sees the Fed cutting its prime lending rate by 1.5 percentage points next year.

75 percent: Rate cuts are typically good news for tech investors. Lower borrowing costs have tended to unleash spending by households and companies, a possible tailwind for Big Tech’s bottom line. Such enthusiasm is perhaps best seen in the performance of the so-called Magnificent Seven, a group of tech firms that drove an A.I.-fueled rally throughout much of the year.

The stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — had climbed by 75 percent this year, as of last week, and now account for roughly 30 percent of the index’s weighted value. The other 493 companies? As a group, they are underperforming the S&P 500.

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