With the Fed given no reason to accelerate tightening, NQ futures extended gains and Micron's record open is now in play.
Updated: Adds May PCE breakdown, Q1 GDP final read, May durable goods orders, and analyst commentary.
The much-awaited inflation data that was widely believed to provide directional cues to the financial markets came in line with expectations, thus proving neutral to the market. The in-line data could help the market savor artificial intelligence (AI) memory chipmaker's thumping fiscal year 2026 third-quarter results.
A duo of Bureau of Labor Statistics (BLS) report released Thursday relayed mixed messages to the Federal Reserve, with inflation tracking in line with expectations, while the first-quarter GDP growth was upwardly revised by much more than expected.
Here's how the main PCE Inflation numbers compared to estimates:
In current dollar terms, PCE increased $156.1 billion month over month (MoM), with services spending growth of $94.3 billion, outpacing goods spending ($61.8 billion). The. biggest increases were for financial services & insurance ($28.4 billion), healthcare ($22.3 billion), housing & utilities ($22.3 billion) and gasoline & other energy goods ($21.1 billion)
Source: BEA
Lloyd Financial Chief Investment Officer Colin Symons highlighted the headline PCE's beat on a MoM basis. "This was the month where concern was high that we'd see a strong number, in part due to World Cup prep boosting Services inflation," he said, adding that the fact that we came in low gives us the ability to speculate that,maybe inflation ,has peaked."
Colins expect the report to help long-duration assets like gold and low-quality growth stocks, as the dollar, drops. The reaction, however, has been a bit muted so far, he added.
The market will not react to the accelerating YoY PCE inflation rate due to the to now-fading energy pressure, he added. West Texas Intermediate (WTI) crude futures fell below the $69 mark earlier on Thursday although they have recouped some of the losses. Yet, the CL contract trades below the $70 psychological level.
The BEA report also showed that personal income, disposable personal income (personal income less current taxes) and personal spending, all of which climbed 0.7% MoM. The savings rate was unchanged at 3% and is still very low as consumers are tapping into savings to support discretionary spending.
Q1 GDP Revised Higher
The BLS also released the final first-quarter GDP report, showing a 0.5 percentage-point upward revision to the preliminary estimate. The U.S. economy has expanded at a fairly robust pace of 2.1% in Q1 compared to a 0.5% pace in the previous quarter. The consensus had called for a 1.6% expansion pace.
The upward revision was attributed to the downward revision to imports, which is a deduction in GDP calculation. Meanwhile, consumer spending was revised down.
Contributions to Q1'26 GDP Percentage Change
The Q1 PCE price index was upwardly revised by one-tenth of a percentage point to 4.6%, while the core PCE price index was left unchanged at 4.4%.
Durable Goods Orders Give Back Gains but Stay Resilient
New orders for durable goods, designed to last for three or more years, fell 4.5% MoM in May, reversing the uowardly revised 8.5% climb in the previous month. The consensus had forecast a steeper 0.5% drop. The weakness was concentrated in the volatile transportation orders (down 14%). Excluding transportations, new orders climbed 1.3%, stronger than the 0.5% pace forecast by economists.
Non-defense capital goods orders, excluding aircraft and parts, rose 1.6% following a 0.7% drop in April. This category is considered a proxy for capital spending. That rebound signals that corporate capital spending appetite remains intact, offering a reassuring data point for an equity market already buoyed by Micron's AI-driven blowout and an in-line PCE print.
How Markets Reacted
The E-mini Nasdaq futures (NQ) and the E-mini S&P 500 futures (ES), which were trading up. more than 2% and 0.66%, respectively, ahead of the data, added modestly to their gains. But since then, the gains have tapered off as traders digest the mixed messages from Thursday's data deluge.
The early optimism generated by artificial intelligence chipmakerMicron's results is expected to hold given the oversold levels following the sharp retreat in the previous session.
Commenting on the trio of data, LPL Chief Economist Jeffrey Roach said, "The real story is the amount of business investment as measured by shipments of capital goods during May and April."
"Given the growth trajectory, the Fed is rightly focused on price stability and will remain hawkish this summer." The economist warned that if the Iran crisis creeps into Labor Day timeframe, there is a higher chance that inflation pressures will seep into other categories and will force the Fed’s hand.
According to MarketFramework data the Micro E-mini Nasdaq 100 futures (MNQ) and the ES contracts were the most actively traded, although the risk disposition was slightly in favor of the shorts.
What the Data Holds For Rates
The biggest risk overhanging Thursday's premarket rally is now removed. The reading gives the Fed fresh reason to accelerate its tightening timeline, effectively handing the bulls a green light to build on Micron's blowout-driven surge. With the macro landmine defused, attention now shifts fully to price action . NQ's path toward the 30,975 all-time high is open, and Micron is poised to open at a record. The bears needed a hot print to make their case today. They didn't get one.