US today: wage data and a 75% chance of a Fed hike
In short
- Today at 8:30 am Eastern (2:30 pm Bulgarian time) the US publishes the Employment Cost Index (ECI) for the third quarter, a measure of wage and benefit growth.
- The Fed is on hold at 3.75-4.00%, and CME pricing shows about a 75% chance of a hike in December after PCE inflation of 3.6%.
- Yesterday the S&P 500 fell 0.30% to 7,720.39 and the Nasdaq fell 1.38% to 26,184.72. Brent crude is at $116.54 a barrel.
Today at 8:30 am Eastern the US publishes its Employment Cost Index, and after PCE inflation of 3.6% markets are watching whether wages add more pressure on prices. On Wednesday we wrote about the Fed decision, and this morning about how inflation pushed gold below $4,000.
What happened
Two key numbers landed yesterday. Headline PCE for September is 3.6% year over year (3.4% in August) and core is 3.1%. US third-quarter GDP is 3.4% annualized, against 2.2% in the second quarter. Personal consumption rose 0.5% on the month, but in real terms it was virtually flat (TradingKey). The Fed held rates at 3.75-4.00%, with two members wanting a hike. CME data show a probability of about 74.9% for a hike at the December meeting.
Today investors will watch the ECI, which tracks wage and benefit growth and shows whether labor costs keep pressuring prices in services (TechFlow). The result was not known when this was written at 7:00 am Bulgarian time (3:00 am Eastern), so we do not guess it.
Yesterday the Dow Jones fell 0.25% to 52,342.56, the S&P 500 fell 0.30% to 7,720.39 and the Nasdaq Composite fell 1.38% to 26,184.72, dragged by technology stocks (Alphabet fell 12.64%). The VIX is at 17.20. In Asia the Nikkei 225 is down 2.54%, led by chip stocks, and Brent is up 1.44% at $116.54 a barrel, on track for a monthly gain of 11.5% (ABC News).
What it means for you
The maths: $1,000 in an index fund like the S&P 500 lost about $3 yesterday, and $1,000 in a Nasdaq fund lost about $13.80. If the Fed raises rates by 0.25 points, the extra interest on a $100,000 floating-rate loan is $250 a year. Gold is $3,998.60 an ounce at 7:00 am Bulgarian time (3:00 am Eastern).
US rates matter for the dollar, for the price of gold (traded in dollars) and for borrowing costs. See the US stock market and gold prices pages.
Bottom line
The US publishes the Employment Cost Index today at 8:30 am Eastern. The Fed is at 3.75-4.00% and markets see about a 75% chance of a hike in December after PCE of 3.6%. The ECI matters because it shows whether wages are adding to inflation in services.
Sources: TechFlow · TradingKey (stocks and PCE) · TradingKey (gold) · ABC News
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For information only. This is not investment advice.
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