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U.S. STOCK FUTURES PARE LOSSES AFTER PCE

The main U.S. equity index futures are red on the day, but off their earlier lows in the wake of the release of the latest Personal Consumption Expenditures (PCE) report.

E-mini S&P 500 futures EScv1 are down around 0.6% vs a loss of around 0.8% just before the numbers were released. The futures were already trading down as investors grapple with the possibility of a government shutdown and a higher interest rate path.

The November headline PCE numbers on a month-over-month and a year-over-year basis both came in cooler than expected. The core PCE index on a month-over-month basis and on a year-over-year basis were also both lighter than the Reuters Poll numbers.

November personal income month-over-month was softer than the estimate. November adjusted consumption was also below the expectation:

According to the CME's FedWatch Tool, the probability that the Fed leaves rates unchanged at its January 28-29 meeting is unchanged at 89%. The chance that the FOMC cuts rates by 25 basis points is 11%.

Looking out to the March 18-19 FOMC meeting, the FedWatch Tool is now showing a slight bias for rates to be in the 4.00%-4.25% area vs the current target rate of 4.25%-4.50%. Conviction in that bias has increased just slightly to 50% vs around 47% just before the data.

The U.S. 10-Year Treasury Yield US10YT=RR is now around 4.50%. It was around 4.54% just before the numbers came out. The yield ended Thursday at 4.57%.

A majority of S&P 500 sector SPDR ETFs are lower in premarket trade with consumer discretionary XLY.P, down about 1%, posting the biggest drop. Healthcare XLV.P leads gainers with a 0.7% rise.

The SPDR S&P regional banking ETF KRE.P is off around 0.1%.

Regarding the data, Adam Sarhan, chief executive of 50 Park Investments in New York said:

"The market is having a little bit of a relief rally here... The Fed came out on Wednesday and said inflation is still public enemy No. 1. They cut rates but... inflation was still not where they wanted it to be."

Sarhan added, "So it's a bullish reaction from the major indices' standpoint... because the data takes away the threat that inflation is out of control... Today's data doesn't force the Fed's hand. It's not hot enough where the Fed has to raise rates."

December U Mich final sentiment is due at 1000 EST (1500 GMT). The estimate is 74.0, which is flat with the prior release.

Here is a premarket snapshot from just shortly before 0900 EST (1400 GMT):

(Terence Gabriel, Caroline Valetkevitch)

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