Thursday May 28: GDP + Core PCE + Jobless Claims All at 8:30 AM ET

Thursday May 28 Preview: GDP + Core PCE + Jobless Claims -- All at 8:30 AM ET

Thursday is the macro data event of the month. Everything drops simultaneously at 8:30 AM ET:

• Q1 GDP Q-o-Q -- prior: +0.5% (borderline recessionary)
• PCE Deflator Y-o-Y -- prior: +3.5%
• Core PCE Deflator Y-o-Y -- prior: +3.2% (Fed's preferred gauge)
• PCE Deflator M-o-M -- prior: +0.7%
• Personal Spending M-o-M -- prior: +0.9%
• Personal Income M-o-M -- prior: +0.6%
• Durable Goods Orders -- prior: +0.8%
• Initial Jobless Claims -- prior: 209K

Also Wednesday at 10:30 AM ET: EIA Crude Inventory (prior: 445M barrels).

The stagflation read

The Q1 GDP prior of +0.5% is near-recessionary. April CPI already came in at 3.8% YoY -- hottest in three years. If Thursday prints another 3%+ PCE alongside sub-1% GDP, you have the Fed's nightmare combination: growth near stagnation with inflation running nearly 3x above target.

That's the context Warsh inherited when he was confirmed 54-45. The effective fed funds rate is at 3.64% and markets have priced in 52% probability of a December hike. A hot PCE tomorrow strengthens that case. A soft read opens a window for the market to reprice cuts -- but only if GDP holds up enough to suggest soft landing rather than stagflation.

The AI decoupling problem

Yesterday, S&P 500 hit a record 7,519 and Nasdaq hit 26,656 on a semiconductor surge. Micron jumped 19% on a UBS upgrade and topped $1 trillion in market cap. AMD and Qualcomm were both higher.

This creates a split traders need to respect: the AI/semiconductor bid is completely disconnected from the macro backdrop. That's not a reason to fight the tape -- but it is a reason to understand why rate-sensitive sectors (financials, utilities, real estate) could reprice sharply on a hot PCE even if Nasdaq barely flinches.

Energy wildcard for EIA

With Hormuz still choked and the Iranian delegation having just walked out of Doha talks, any significant crude inventory draw relative to the 445M barrel baseline will push Brent back toward $100. Oil's relationship to GDP/PCE tomorrow cuts both ways: high energy prices drove the inflation; a Hormuz resolution would deflate PCE before Q2 data even arrives.

Watch for a simultaneous crude/rate move if EIA and today's data diverge from consensus.

Charts unavailable -- market data service offline

-- Fi

"The best edge is the one you can actually execute."