![\"Real](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/06\/Real-Consumer-Spending-5-31-24.png\")
<\/figure>\n\n\n\nPast performance is not indicative of future results<\/p>\n\n\n\n
Inflation Data Matches Expectations<\/h2>\n\n\n\n
Headline and core PCE price indices increased 0.3% and 0.2%, in-line with expectations and near the previous month\u2019s 0.3% on both fronts. On an annualized basis, headline and core figures arrived exactly as projected while remaining unchanged at 2.7% and 2.8% year over year (y\/y). Driving prices higher were non-durable goods and services, which saw stickers rise 0.5% and 0.3% m\/m. Offsetting some of the pressures were durable goods, which saw m\/m deflation of 0.3%.<\/p>\n\n\n\n Past performance is not indicative of future results<\/p>\n\n\n\n Investors are assessing if the European Central Bank (ECB) may cut its three key rates at a slower pace than previously anticipated following hotter-than-expected inflation data released this morning and yesterday\u2019s unemployment report pointing to a tight labor market. Consumer prices in the eurozone, which consists of 20 countries that use the euro, rose 2.6% in the twelve months through May, up from the 2.4% rise as of April, according to the European Union\u2019s statistics agency. Analysts anticipated a May rate of 2.5%. The ECB\u2019s headline inflation goal is 2%. Core inflation, which lacks volatile food and energy prices, increased 2.9%, 20 basis points (bps) higher than in April, while services price climbed 4.1% from 3.7% in the preceding month. On a month-over-month basis, headline inflation increased 0.2% and core climbed 0.4%. Inflation during the past 12 months was led by services, up 0.6%; food\/alcohol\/tobacco, up 0.2%; and goods, up 0.1%. Energy provided some relief, however, with prices falling 1.2% m\/m.<\/p>\n\n\n\n This morning\u2019s stronger-than-expected inflation report comes just one day after data showed that the eurozone unemployment rate fell to 6.4% in April, an all-time low for the area. Investors still expect the ECB to cut rates next week from the current record high levels that range from 4% to 4.75%, but the strong inflation and labor data are clouding the outlook for a potential subsequent rate cut in July.<\/p>\n\n\n\n Recent earnings releases confirm a trend of consumers seeking out bargains, but in at least one example, shoppers are increasing discretionary spending. Also among consumers, the power of celebrity promotions and branding helped Gap Inc. produce strong quarterly results. In the tech industry, companies are continuing to splurge on artificial intelligence, but they are slowing the pace of buying other types of technology. Those are a few highlights from the following earnings summaries:<\/p>\n\n\n\n Risk-off trading is dominating today as equity bears appear to have awakened from a long hibernation. Not one major US equity index is in the green as investors worry about profit sustainability. Steering the vessels south are the Nasdaq Composite and S&P 500 benchmarks, which are losing by 1.4% and 0.5%. Small-caps and cyclicals are trying to hang in there, with dip buyers lured in by lower rates and cheaper valuations, but the Russell 2000 is down 0.1% while the Dow Jones Industrial is near the flatline. Sectoral breadth is mixed, with technology, consumer discretionary, and industrials leading the way lower; they\u2019re down 1.7%, 0.8% and 0.5%. Leadership is comprised of real estate, healthcare and energy with the segments higher by 1.2%, 0.8% and 0.7% so far. Treasurys are catching a bid on the back of heightened fears of an economic slowdown, with the 2- and 10-year maturities changing hands at 4.89% and 4.5%, 5 basis points lower on the session. The dollar is near the flatline, though, as the greenback gains versus the pound sterling, franc, yuan and yen but loses relative to the euro and Aussie and Canadian dollars. Commodities are getting battered on the back of demand fears and a lack of safe-haven demand. WTI crude oil, copper, gold and silver are lower by 1%, 1.6%, 0.6% and 2.7%.<\/p>\n\n\n\n At this point in the cycle, incoming economic data are starting to increasingly align with corporate earnings calls. Investors are growing worried that the consumer may be close to tapping out, while the profitability prospects of AI may fail to offer broad benefits to many segments of the market. Yesterday\u2019s figures on corporate profits were emblematic of this development, which is characterized by the early innings of artificial intelligence being unable to lift the revenue proposition of businesses at a time of constrained spending. As for consumer outlays, however, many months of weakness are required before an established trend is made. In many of the post-pandemic months, we\u2019ve seen consumption stall to a halt or contract, only to recover strongly in the following reports.<\/p>\n\n\n\n![\"Personal](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/06\/PCE-5-31-24.png\")
<\/figure>\n\n\n\nInflation and Labor Data Cast Clouds Over ECB Policy<\/h2>\n\n\n\n
Shoppers Seek Bargains While Companies Crimp on IT<\/h2>\n\n\n\n
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Bears Spark Broad Equity Selloff<\/h2>\n\n\n\n
Worries About Corporate Profit Increase<\/h2>\n\n\n\n