Home Tech Key Fed Inflation, Wage Data Ease Worries Ahead Of Tariffs; S&P 500 Futures Rise

Key Fed Inflation, Wage Data Ease Worries Ahead Of Tariffs; S&P 500 Futures Rise

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Wall Street got some soothing data on Friday for the Federal Reserve’s primary inflation rate and wage-growth measure. Although President Trump has signaled that tariffs may be coming on Saturday, Feb. 1, the S&P 500 has climbed close to a record, with Apple (AAPL) leading the way after topping earnings estimates.

Good news on inflation and wages will make it easier for the Fed to look through any one-time increase in prices due to tariffs.





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PCE Inflation

As expected, the personal consumption expenditures, or PCE, price index rose 0.3%, lifting the 12-month inflation rate to 2.6% from 2.4% in November.

Fed policy is focused more on core inflation, which strips out volatile food and energy prices. The core PCE price index matched forecasts, rising 0.2% and leaving the 12-month core inflation rate at 2.8%.

The data looked even better when not rounded to tenths of a percentage point. The core PCE price index rose 0.156% on the month, as the 12-month core inflation rate dipped to 2.79% from 2.82%.

The PCE inflation data is part of the personal income and outlays report issued by the Bureau of Economic Analysis. Personal income rose 0.4% in December, as expected. Personal consumption grew 0.7%, above 0.5% estimates.

Employment Cost Index

The ECI matched expectations, rising 0.9% in Q4. That lowered 12-month compensation gains to 3.8%. In Q3, the Fed’s primary measure of compensation rose 0.8%, cooling the 12-month increase to 3.9%.

Fed Rate-Cut Outlook

Ahead of Friday’s data, markets are pricing in 18% odds of a rate cut at the March 19 Fed meeting and 44% odds of a cut at the May 7 meeting. Odds favor a cut at the June 18 meeting, 69.5% to 30.5%, according to CME Group’s FedWatch tool.

S&P 500

The S&P 500 rose 0.6% in Friday morning stock market action after the PCE price index data. Apple stock rose more than 4%, signaling an early entry.

The S&P 500, which rose 0.5% on Thursday, has regained its footing after diving early Monday on Chinese startup DeepSeek’s surprisingly competitive and low-cost AI model.

On Thursday, the S&P 500 finished within 0.8% of its Jan. 23 all-time closing high.

Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.

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