Economy Heating Up on PCE for June

Thursday, July 31, 2025

Pre-market futures are in the green this morning and holding steady — all but the small-cap Russell 2000, which is currently trading down half of one percent. The Dow is up +115 points, the S&P 500 is +60 and the Nasdaq is up a strong +320 points at this hour. Bond yields are also ticking up somewhat. These numbers appear to be in reaction to this morning’s economic posts.
 

PCE Most Warmer than Expected in June

Almost as a nod to Fed Chair Jerome Powell’s comments yesterday about the state of the economy, this morning’s Personal Consumption Expenditures (PCE) report for June came in mostly warmer than expectations. We got a clue to these results yesterday, when Q2 GDP put out its first print hotter than expected at +3.0%.

Personal Income last month reached +0.3%, 10 basis points (bps) ahead of expectations — a nice bounceback from May’s disappointing -0.4%, which was unrevised. Personal Spending is about the only metric in this morning’s series to come down 10 bps from expectations, to +0.3%. The previous month was upwardly revised to 0.0% on personal spending, illustrating a level of caution being exhibited by consumers.

The overall PCE Index month over month was in-line with expectations at +0.3%, following an upwardly revised +0.2% the prior month. Stripping out volatile food and energy expenditures, the core PCE print was also in-line at +0.3%, following an unchanged +0.2% previously. 

Year over year PCE reached its highest level of the year: +2.6%, 10 bps higher than anticipated. We last notched a higher PCE number back in 2023, when it reached +3%. Core PCE year over year came in at +2.8% — matching the prior month’s upwardly revised figure, and the highest we’ve seen since February’s +2.9%. We had appeared to be ratcheting down over March and April, but we’ve clearly reversed course.

These figures do not demonstrate inflation flying out of control, but neither do they illustrate a firm control over levels toward 2%. From September 2022 highs, we had been on a deceleration track — especially from mid-2023 to the first months of this year — but look to be flatlining more than half a point above the Fed’s preferred inflation level of +2.0%.

Weekly Jobless Claims Remains Subdued: 218K Last Week

For the first time in seven weeks, Initial Jobless Claims moved up instead of down. The good news is that is was only by 1K to 218K overall — a far cry from the 250K we saw in early June, when it looked as if the jobs market was unravelling. These figures tell a different story: that new unemployment claims are back down to early 2025 levels.

Continuing Claims are pretty much identical, leveling off for now at 1.946 million — exactly what was reported a week ago — after five weeks of methodically lower longer-term jobless claims. We had been seeing, from late winter until five weeks ago, a fast track toward 2 million continuing claims which never came about. 

Tomorrow’s all-important Employment Situation report for July will be the near-term verdict: improving jobs numbers on the Weekly Jobless Claims reports counter the private-sector payroll weakness over the past few months from ADP ADP. Expectations are for 100K new jobs filled in July, lower than the prior month by -47K. 

Q2 Earnings Roundup: AbbVie, Mastercard & More

Plenty of new Q2 earnings reports are out this morning. Let’s give a few vitals for a number of notable posts:

Pharma major AbbVie ABBV made $2.97 per share in its Q2 earnings, ahead of the $2.89 projected. The Zacks Rank #3 (Hold) stock is up +4% in the pre-market and +6.5% year to date.

CVS Health CVS rocked earnings estimates, with its reported $1.81 per share amounting to a +23.13% earnings beat. The Zacks Rank #2 (Buy)-rated stock is +8% in today’s pre-market, +38.8% year to date.

Mastercard MA beat earnings expectations by a solid dime: $4.15 per share versus $4.05 in the Zacks consensus. This Zacks Rank #3-rated stock is up +1% in today’s pre-market, +6% year to date.

Bristol Myers-Squibb BMY had perhaps the most impressive earnings beat of the morning: $1.46 per share outpaced estimates by +36.45%. The stock had been rated a Zacks Rank #4 (Sell) going into the print, but is up +3% in today’s pre-market.

It’s not all good news this morning, however. International Paper IP saw a big earnings drop — $0.20 per share versus $0.38 anticipated, for a negative surprise of -47.37%. Shares are down -6.8% in the pre-market for this Zacks Rank #3.

Sirius XM SIRI also missed estimates by a considerable margin: 57 cents versus 79 cents, for a -27.85% earnings surprise. The stock had brought a Zacks Rank #5 (Strong Sell) into the earnings print. Shares are flat in today’s pre-market.

What to Expect from the Stock Market Today

There is a Chicago Business Barometer (PMI) report expected out after the opening bell this morning, but no further scheduled announcements from companies or financial agencies. What we are looking forward to, however, are earnings reports after today’s close for “Mag 7” companies Apple AAPL and Amazon AMZN, along with Roku ROKU and a host of others. 

Apple is expected to bring modest gains for the quarter, while Amazon looks to post high-single-digit growth numbers on both top and bottom lines. This will be compared to Microsoft's MSFT strong quarter reported yesterday.

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