Wall Street retreats on growth concerns ahead of PCE data

Will US markets recover from Friday's sell-off?

Wall Street update hits the skids as push to new highs undermined my growth and inflation concerns. United States (US) stocks ended lower last week amid weaker economic data and inflation concerns. Wall Street fell 1118 points (-2.51%), the US Tech 100 dropped 2.26%, and the US 500 lost 1.66%.

Economic data signals slowdown

The University of Michigan consumer sentiment index for February was revised down to 64.7 from the preliminary reading of 67.8, falling from 71.1 in January. The five to ten-year inflation expectations rose to 3.5% from 3.3%, marking the highest level since 1995.

The US services purchasing managers' index (PMI) unexpectedly fell to 49.7 in February from 52.9 prior. The report highlighted increased uncertainty about federal government policies related to domestic spending cuts and tariffs, while rising prices also contributed to the decline.

Fed speeches and inflation data in focus

This week, market attention turns to Federal Reserve (Fed) officials' speeches, personal income and spending figures, and the Fed's preferred inflation measure, core personal consumption expenditures (PCE), previewed below.

Nvidia earnings preview

Nvidia will release its fourth quarter (Q4) fiscal year (FY) 2025 results on Thursday 27 February at 8.20am (AEDT). After falling to $113.01 on DeepSeek concerns, the share price has rebounded to $143.44.

The company is expected to report earnings per share (EPS) of $0.84 on $38 billion in revenue. Markets will closely watch guidance around future demand and any commentary regarding DeepSeek.

Options pricing suggests a 7.7% move in either direction following results. Based on Friday's closing price of $134.43, this indicates potential movement towards $145 or $124.

Core PCE price index preview

Date: Saturday, 1 March at 12.30am (AEDT)

Headline PCE prices rose 2.6% year-on-year (YoY) in December 2024, moving further from September's three-year low of 2.1%. Core PCE, the Fed's preferred inflation measure, increased 0.2% month-on-month, keeping the annual rate at 2.8%.

For January, analysts expect headline PCE inflation to ease to 2.5% YoY, while core PCE inflation is forecast to decline to 2.6% YoY from 2.8%. The US rates market currently prices a 25 basis point (bp) Fed interest rate cut in July, with 44 bp of total cuts expected this year.

Headline PCE price index chart

US Tech 100 technical analysis

The US Tech 100's sideways trading pattern over eight weeks, following the 22,133-record high of mid-December, culminated in a marginal fresh record high last week. However, waning momentum saw prices retreat within the recent range and below support at 22,000 - 21,800, exposing last week's move as a false break higher.

While resistance holds at 22,200, we expect the index to extend its decline towards the mid-January low at 20,538, with scope to test critical uptrend support between 20,128 (200-day moving average) and 19,750 (uptrend support from the December 2022 low).

A sustained break above 22,200 would indicate the uptrend has resumed, targeting 23,000.

US Tech 100 daily chart

US 500 technical analysis

The US 500 briefly exceeded its January high of 6128 last week before retreating towards 6000. The subsequent pullback from 6147 suggests a false break higher and indicates a corrective move lower may have begun.

Initial downside targets include the mid-January low at 5923, followed by uptrend support at 5860, drawn from the October 2023 low of 4103.

A sustained break above 6150 would confirm the uptrend has resumed, targeting 6400.

US 500 daily chart

• _{Source: TradingView. The figures stated are as of 24 February 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}