Good morning investors,
Markets demonstrate measured positioning ahead of crucial PCE data as investors process yesterday's Fed minutes and evolving trade policy implications. While futures indicate caution, record consumer confidence and resilient housing demand suggest sustained economic momentum despite policy evolution.
Market Review
Tuesday's session highlighted remarkable resilience amid trade policy developments. The Dow advanced 123.74 points (0.28%) to 44,860.31, while the S&P 500 gained 0.57% to 6,021.63 and Nasdaq rose 0.63% to 19,174.30. Markets recovered from early pressure that saw the Dow swing from -300 points to finish positive, suggesting investors view proposed tariffs as negotiating tactics rather than immediate policy.
Policy Framework
The November FOMC minutes revealed growing confidence in inflation moderation, with "almost all participants" seeing sustainable return to 2% target. Officials emphasized gradual approach toward neutral rates while acknowledging uncertainty around ultimate level. Market probability for December cut remains near 60% as committee cited waning business pricing power and well-anchored expectations.
Economic Evolution
Consumer Dynamics The Conference Board's consumer confidence reading reached 111.7, increasing 2.1 points as stock market optimism hit record levels at 56.4%. Particularly encouraging was strengthening sentiment among under-35 consumers and declining five-year inflation expectations to 4.9%, lowest since March 2020. Labor market views improved with "plentiful" jobs at 33.4% while "hard to get" measures declined.
Housing Framework Mortgage applications demonstrated meaningful strength, rising 6.3% as rates moderated to 6.86%. Purchase applications surged 12% (+52% YoY) amid improving inventory and post-election clarity. The average purchase loan size reached $439,200, suggesting sustained high-end market activity despite rate pressures.
Corporate Development
Technology sector developments create selective pressure as Dell and HP issued cautious forecasts questioning AI-driven PC recovery momentum. However, CrowdStrike's raised guidance (FY revenue $3.92-3.93B vs prior $3.89-3.90B) suggests sustained cybersecurity demand amid evolving threats.
Today's Framework
PCE inflation data at 10:00 AM ET warrants careful attention:
Core PCE Expected: +0.3% MoM, +2.8% YoY
Personal Income Expected: +0.3%
Consumer Spending Expected: +0.3%
Additional releases include:
Q3 GDP Second Estimate (Expected 2.8%)
Durable Goods Orders (Expected +0.5%)
Pending Home Sales (Expected -2.0%)
Strategic Outlook
Current market structure requires sophisticated discrimination amid evolving policy dynamics. While proposed tariffs create selective sector pressure, particularly in autos (Ford -2.6%, GM -9%) and consumer stocks (Constellation -3%), broader market resilience suggests confidence in underlying economic trajectory.
The combination of strengthening consumer sentiment, accommodative Fed messaging, and sustained housing demand creates compelling framework development despite near-term trade uncertainty. Careful attention to both opportunity and risk remains essential for long-term success.
As always, feel free to reach out with questions about positioning for these evolving market dynamics.
Best regards, Dan Sheehan [email protected]
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.