Record Highs for the Blue Chips, Key Fed Inflation Gauge Reaction, China's Stimulus Rally 9/27/24

Jim Cramer (0:00)

It's Jim Cramer here. You're listening to the opening bell of CNBC Squawk on the Street. Don't miss a minute of the action.

David Faber (0:07)

Good Friday morning. welcome to Squawk on the Street. I'm David Faber with Sara Eisen and Mike Santoli. We are live and we're at Postline at the New York Stock Exchange. Carl and Jim both have the morning off. Let's give you a look at futures as we get ready to wrap up the trading week. You can see once again, we're looking for a higher open. And our roadmap does begin with those markets, of course, looking to set new milestones. This one day after the S&P 500 posted its 42nd record closing high.

Sara Eisen (0:36)

As for the Fed's preferred inflation gauge, PCE coming in a bit tamer than expected year over year. And also had the stimulus effect on China stocks in that country, posting their strongest week since 2008

David Faber (0:49)

Yeah, big week for that. Let's let's get to the market reaction to that PCE number. Of course, great to have Sara and Mike here with me. Sara, I don't know how big a surprise was it, I guess, we'd start with.

Sara Eisen (1:03)

Well, it's now become the secondary data point to jobs because the Fed has told us such. So I'm more interested in next Friday's jobs report. But good news for the Fed, for the markets. Inflation was pretty tame. 0.1% increase in the month of August was actually less than economists expected, 0.2.

The year over year pace goes up a little bit to 2.7%. It's 2.68% unrounded, which is important, which is a little higher than the 2.6.

Mike Santoli (1:29)

The core unrounded is 0.13 instead of 0.15.

Sara Eisen (1:32)

I know, we're doing the unrounded thing.

Mike Santoli (1:33)

Which is what rounds to 0.1 versus 0.2.

Sara Eisen (1:35)

A little underwhelming on the spending and incomes data. But nonetheless, personal spending gained just 0.1% in August versus 0.4% prior. So consumer softness, I think it's part of that narrative. The only other thing I wanted to mention is the savings rate ticked down by 0.1 to 4.8, which is the lowest since December 2023

So watching that savings rate comes down, again, speaks to a little softness. It's a good number, though, I would think, Mike, for the markets because, look, if the Fed does 50, if the Fed does 25, we can debate it every single day like we did last time. The most important thing is that the bar is pretty high for them to stop easing right now. Nobody's talking about that. And as long as they're in easing mode, and we're not in recessionary mode, which these numbers don't necessarily speak to, and now we've got the China stimulus, it's all things go.

Mike Santoli (2:30)

Right. And the PCE inflation piece definitely validates people's hope and assumption that we could start to set aside the inflationary trends. They've been very, very close to target and very mild. And I think all that sort of suggests we are basically on growth watch. I agree on the Fed. The Fed's on the case.

They've told us with last week's action that they're going to vow not to be late, certainly not intentionally. And I think the market kind of gets that. The tricky part is we're mostly, in terms of the equity market, we are priced for something like a soft landing. So it's not as if when we get further evidence that, hey, guess what, inflation's in check. Growth is slow but still positive. That's not incremental surprise to the market, therefore not incremental reason to get excited. It just more kind of confirms what we've already thought. And I think the market's kind of trading more or less appropriately. To your note, you did go down a couple of ticks after the PCE inflation number, which does, and the person like I'm spending as well.

Sara Eisen (3:32)

Because it buys them more space to go 50 if they want to get.

Mike Santoli (3:34)

Right, you just do a tiny little turn of the dial that says, okay, maybe we can lean more toward 50 or more toward deeper cuts ultimately through next year.

Sara Eisen (3:43)

Right, I think that the notable price action this week, so record high after record high, 42 record highs so far this year. But small caps have lagged a little bit since the Fed. Treasure yields have been a little firmer since the Fed. We're going the other way this morning. But some interesting sort of cross currents. Gold has performed better than the S&P 500 this year, continues to make new highs. bitcoin has had a really good, and that makes sense post Fed eating, right?