Wall Street Today | US Core PCE Prices Post Smallest Monthly Rise Since Late 2020

The Federal Reserve’s preferred measure of underlying inflation rose at the slowest monthly pace since late 2020, helping to lay the groundwork for policymakers to forgo an interest-rate hike at their next meeting.

The core personal consumption expenditures price index, which strips out the volatile food and energy components, climbed 0.1% in August, according to the Bureau of Economic Analysis report out Friday. A key gauge of services costs watched closely by the Fed also posted the smallest monthly advance since 2020.

Fresh pressure points are building on Wall Street that threaten the bullish narrative that a soft economic landing can be secured in this menacing monetary era.

All that just sparked the worst month for the S&P 500 of this gravity-defying year in markets. At the same time an equal-weighted version of the index — where the likes of Expedia Group Inc. carry the same heft as Microsoft Corp. — has now shed nearly all of its 2023 gains, hurting active managers who failed to buy up the biggest blue chips in Corporate America.

Speaker Kevin McCarthy’s plan to keep the government open for 31 days past the Oct. 1 shutdown deadline was defeated by hardliners in his own party, making a lengthy federal closure more likely. Financial markets have largely shrugged off the growing risk of a shutdown as investors focus on high-interest rates, rising oil prices, labor strikes, and slowing consumer spending.  

The Senate is working on a bipartisan bill to fund the government for 47 days, while providing $6 billion in aid to Ukraine and $6 billion in disaster aid. Because of procedural hurdles raised by opponents of Ukraine aid, it is likely to approve that bill on Sunday, hours after the shutdown deadline.

The United Auto Workers union expanded its strike to a  factory in Chicago and a  plant in Michigan, citing a lack of progress at the bargaining table.  UAW President  Shawn Fain said Stellantis delivered a proposal that made significant progress on the union's demands, including cost-of-living adjustments.

Those walkouts would add nearly 7,000 more workers to the roughly 18,000 UAW members already on strike across the three companies, at three assembly plants and dozens of parts-distribution facilities. The Detroit companies combined have about 146,000 union workers.

US crude production reached the second-highest level on record in July as output from Texas’s Permian Basin soared to an all-time high. Output rose to 12.991 million barrels a day, the highest since a peak of 13 million barrels in November 2019, according to data from the Energy Information Administration. Most of the gain came from Texas, where drillers produced a record 5.63 million daily barrels.

The output growth comes even as explorers dial back activity. The number of rigs searching for oil in the US has contracted by 20% since late November, with the total falling by five this week to 502, according to data released Friday by Baker Hughes Co.