Core PCE Drops to 3.0% as Spending Jumps 0.9%

Core PCE fell to 3.0% in August. Forecasts had it at 3.3% or higher, and the monthly gain was 0.2%, with headline at 3.4% against 3.7% expected. Spending didn't slow at all. Outlays rose 0.9%, 0.6% after inflation, the morning after consumer confidence dropped to 81.9 against 89 expected. SPX closed 7,670.84, down 0.2%, after opening on its high. Premarket 7,695.

That's the second dovish day running, and the first one didn't help. Williams said Tuesday there's no need to rush another hike, October odds fell from about 70% to roughly a coin flip, and the two-year dropped to 4.89%. The 30-year went the other way and touched 5.61%, its highest since 2002. On Sep 17 the ten-year fell the morning after a hawkish hike. Now the long end sells off when the Fed backs away, which leaves supply and inflation risk doing the work. Stocks have noticed. Monday and Tuesday both opened near their highs and sold from there. Micron reports after the close against its own $50 billion guide, payrolls Friday.

The gap puts price right on top of the call wall. 7,690 is five times any other node on the profile, 5 under premarket, with the 8-day and 13-day on either side of it, so it's the floor now and a heavy one. Above it the gamma is positive but thin, no strike even a fifth of the wall's size, and the most of it sits at 7,720, where prior demand at 7,719 and 7,725 lines up with Monday's high. That's grind territory, with dealers damping the move. The flip is 7,680 and clean. Under it the profile is negative almost strike for strike to the put wall at 7,600, with 7,650 nearly as heavy, so losing 7,680 is where the pin ends.

The open isn't the buy, given how the last two went. The long is 7,690, the call wall with both short averages on it, for 7,713 and 7,725, and 7,725 is where profit gets taken ahead of Micron. A close under 7,677 puts price back in negative gamma with the 21-day gone, and Tuesday's 7,654 low comes next.