VIDEO: Why Next Week’s 'Challenging' Data Will Be More Impactful Than Friday's PCE
We're being mindful of Extreme Fear in the market as the S&P 500 flirts with this support level.
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In today's Daily Rundown video, Chris Versace explains why a cautious stance on the market and with TheStreet Pro Portfolio is warranted as we brace for next week's February-facing economic data.
While the market may react to Friday's January PCE price index numbers, Chris explains why the smart move is to focus less on that and more on several pieces of data coming at us next week.
The portfolio will continue to look for opportunities, but we have to be mindful of the S&P 500 as it flirts with support levels at the 100-day moving average.
Transcript
CHRIS VERSACE: Hey everyone, Chris Versace here. It is Thursday, February 27. I hope you've seen our note on NVIDIA. We walked through our reaction to the company's January quarter results, but also the outlook as well. Discussing our take on the impact of ramping Blackwell, good problems, strong demand, but the near-term impact on margins.
But we also shared with you why we think we want to remain owners of NVIDIA shares for the medium to longer term, because primarily we are still in the early innings of AI adoption. I would encourage you to really read the note. We spell it all out there.
And I will also share that coming up later today, we will have a preview note talking about quarterly results from Elastic after today's market close. But also what we'll be looking for inside quarterly results from Dell and HP. Quick preview if you will, we'll be interested to what they have to say about AI PC outlook, obviously for Qualcomm. But we'll also be interested in what they say about server shipments and what that could mean for data center and AI as well. So again, we'll have that note out later today.
So the question is, what do we want to talk about during today's video? Really, I want to talk about a couple of things with you. One is the market remains in a very, on one hand, you could say cautious footing. But on the other hand, if we look at the fear and greed index, there's no question that there's a lot of fear in the market. That index is actually flashing extreme fear.
At the same time, if we look at a chart of the S&P 500, we talked earlier in the week about how that was below the 50-day moving average. And now it is below the 100-day moving average. So we're going to want to watch that very, very carefully.
And as we do, I just want to share some thoughts ahead of some of the data that we'll be getting tomorrow. Most notably, the core PCE price index for the month of January. As you know, a lot of the other January inflation data moved in the wrong direction.
We've talked about that quite a bit. We also recently talked about some of the more softer indications of inflation in February. Consumer inflation expectations obviously gapping up, but also what we saw in the conference board's consumer confidence data as well, which echoed that.
So tomorrow morning when we get the PCE price index for January and the core reading, are we going to be overly focused in on that? No, we're not. I do think that the market will react to the to the numbers when they come in. And the expectation is that the year-over-year core PCE price index will dip to around 2.5%.
Candidly, I would be surprised if we see that, just given all the other factors that we've seen. But at the same time, I would argue with you that it's going to be a little rear view-ish. What's more important, in my view, and could really be a reason to focus in on the S&P 500, the 100-day moving average, is going to be the data that we get next week.
It's the usual start-of-the-month fair. But remember, what we saw in the flash PMI report and those February inflation indicators that I just mentioned, these data points are going to capture business and consumer initial reaction to the prospect of tariffs. But we're also going to see the impact as we move through the PMI reports to the February employment report.
Initial data showing the potential headcount reductions that are starting to happen in the federal government. So it can be a very challenging week of data next week. So we're going to proceed cautiously.
And again, I wanted to preview this to you because of the timing of the January PCE price index tomorrow. So will we be breaking it down and contemplating what it means? Yes. But again, I think it's the data that we get next week that will be far more impactful on the market.
So we are going to remain in a bit of a cautious holding pattern, let's call it. I know that we made some moves earlier with the portfolio this week. But remember, those positions were oversold.
So we want to be opportunistic, when and where it makes sense. But with the S&P 500 and its RSI reading around 39, not oversold, we do want to be mindful of the market and at least in the very near term tread carefully. As we get that data next week, we will continue to revisit the notion of when is the right time to be opportunistic with the portfolio.
So please be sure to continue to check your emails, your alerts. We want to make sure you're getting our latest thoughts. We do have coming at you tomorrow afternoon, the monthly roundup. Yes, it is once again time for that.
End of the month, that means the monthly roundup. We will have, of course, our usual recap of the market during the week. We'll be talking about what will be focusing on next week in much more granular detail. But we also will be reviewing all of the positions in the portfolio.
And that, again, will be coming your way tomorrow afternoon after the market close. And I look forward to getting your reactions to it. A lot of work goes into it, but I think when we put it on this monthly timetable, it is extremely helpful and insightful. So I would encourage you all to read that.
And again, please be sure to check all your alerts. Again, if we make any moves with the portfolio, you know that we want you right there with us. Thanks for watching. And we've got much more coming at you. Stay tuned.
