On Monday, the Dow Jones Industrial Average (DJIA) rose approximately 300 points as it attempted to recover from recent losses linked to a drop in consumer confidence. Market sentiment remains cautious, with uncertainties still present in various sectors.

Consumer sentiment data from February raised concerns, shifting focus toward earnings reports from Home Depot and Lowe’s this week. Additionally, the US Personal Consumption Expenditure (PCE) inflation figures are anticipated, as traders seek confirmation regarding January’s higher-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) inflation.

Despite mixed sentiments, over two-thirds of DJIA’s components gained ground on Monday, although Microsoft shares fell about one percentage point due to reduced data centre spending. The Dow remains in bear territory, with price movement constrained below the 50-day Exponential Moving Average (EMA) at around 43,930.

The Dow experienced a roughly 2.75% decline across two days but is now climbing back from four-week lows. Price action continues to stay above the long-term 200-day EMA, near 42,000.

The Core Personal Consumption Expenditures (PCE) measures price changes for consumer goods and is the Federal Reserve’s preferred inflation indicator. The month-on-month figures assess price variations from the previous month, while the core reading excludes volatile food and energy prices.

Following the GDP report, the US Bureau of Economic Analysis releases PCE Price Index data, along with Personal Spending and Personal Income updates. The Core PCE annual index serves as a key inflation gauge for Federal Open Market Committee (FOMC) policymakers, with unexpected strong readings potentially bolstering the USD against its counterparts.

Monday’s upswing in the Dow provided a bit of relief after last week’s pressure, but sentiment remains careful. With consumer confidence showing weakness, traders appeared to zero in on earnings reports from Home Depot and Lowe’s for insight into consumer resilience. At the same time, market participants are waiting for the latest Personal Consumption Expenditures (PCE) figures to see whether inflationary trends from January’s Consumer Price Index (CPI) and Producer Price Index (PPI) carry through.

Although the majority of stocks in the index advanced, Microsoft’s dip stood out. A reduced appetite for cloud infrastructure investment put some weight on its shares, causing them to slip by around one per cent. The Dow has yet to push past its 50-day Exponential Moving Average (EMA), hovering under 43,930. Nonetheless, it remains above the critical 200-day EMA, which sits closer to 42,000. The recent two-day decline of nearly 2.75% placed the index at a four-week low before Monday brought some recovery.

With Core PCE data approaching, we acknowledge its weight in guiding Federal Reserve policy. This particular measure strips out food and energy costs, enabling policymakers to focus on underlying inflation. Since the Federal Open Market Committee (FOMC) already analysed Gross Domestic Product (GDP) figures, attention now turns to the PCE Price Index, alongside reports on Personal Income and Spending. Should the data exceed expectations, traders will likely reposition themselves accordingly, and the US dollar could strengthen as a result.

Keeping an eye on how these events unfold will provide better perspective on what to expect next. Whether equities hold their ground or give way to further pullbacks may come down to inflation trends and subsequent adjustments in interest rate expectations.