Category "Prop Trading"

Given that consumer spending slowed more than anticipated in January and price pressures remained sticky, new statistics may indicate a growing conflict between the US Federal Reserve’s twin inflation and employment targets. Traders continued to place bets that the Fed will lower interest rates by a quarter of a percentage point during this year’s June and September meetings, but analysts pointed out that the situation appeared to have grown more complicated and would force policymakers to make a tough choice in the coming weeks. It “presents a dilemma for the Fed…if you mix them together, that equals stagflation,” according to Peter Cardillo, chief market economist at Spartan Capital Securities in New York, who noted that signs of slowing GDP and inflation that is still above the Fed’s 2% target. “There is a lot of anxiety for the Fed currently.” Stagflation is the term used to describe the combination of high inflation and poor growth that may require policymakers to decide between tightening monetary policy to guarantee that inflation returns to target or reducing rates further, at the margin, to promote economic growth and jobs. This week, policymakers started to raise that prospect.

While consumer spending unexpectedly shrank in January, U.S. inflation matched the pace of the previous month and slowed on an annualized basis, giving Federal Reserve policymakers a confused economic picture when deciding how to proceed with interest rate policy. The Bureau of Economic Analysis at the Commerce Department released statistics on Friday that showed a 0.3% increase in the Personal Consumption Expenditures (PCE) Price Index last month. The number was consistent with the pace of December, which saw the biggest growth since April 2024. PCE inflation decreased little from 2.6% to 2.5% in the 12 months ending in January, which was in line with economists’ projections. When food and energy are taken out of the equation, so-called core PCE inflation dropped from 2.9% in December to 2.6% year-over-year, which was in line with forecasts. The gauge’s initial value in December was 2.8%. Core PCE met expectations as well, increasing slightly from 0.2% to 0.3% on a monthly basis. After an upwardly revised 0.8% gain in December, consumer spending—which makes up a significant portion of the U.S. economy—dropped by 0.2%. The number had increased by 0.2%, according to analysts.

Early Friday trading saw a rise in U.S. stocks as investors evaluated a key inflation data that the Fed favors. The tech-heavy Nasdaq Composite had gained 47 points, or 0.3%, the benchmark S&P 500 had increased 17 points, or 0.3%, and the 30-stock Dow Jones Industrial Average had increased 200 points, or 0.5%, by 10:22 ET (15:22 GMT). The previous session saw a decline in the major averages, with Nvidia (NASDAQ:NVDA) leading the way with an 8.5% decline that erased $274 billion from its market worth. Fresh tariff comments from U.S. President Donald Trump, who announced that previously postponed duties on Canada and Mexico would take effect on March 4 in addition to an additional 10% duty on Chinese imports, also shook sentiment.