LPL Financial Economist Warns of Inflation Risks after 0.7% GDP Revision
LPL Financial’s chief economist warned of persistent inflation risks as Q4 US GDP was revised down to 0.7% from 1.4%, complicating Federal Reserve policy decisions. January PCE inflation rose 2.8% year-over-year with core PCE at 3.1%, while the Dow gained 166 points to 46,844.
1. GDP Revision and Market Reaction
The first revision of fourth-quarter gross domestic product showed growth of just 0.7%, down from the prior 1.4% estimate, prompting a 0.4% rise in the Dow Jones Industrial Average (166 points) to 46,844. The S&P 500 and Nasdaq also climbed 0.4%, while the Russell 2000 led gains with a 0.9% jump as investors weighed softer economic momentum.
2. Inflation Data and Fed Outlook
January’s Personal Consumption Expenditures price index rose 2.8% year-over-year and 0.3% month-over-month, with core PCE up 3.1% annually and 0.4% monthly. LPL Financial’s chief economist cautioned that disruptions from the Middle East conflict could keep underlying inflation elevated, potentially heightening uncertainty in the Federal Reserve’s upcoming projections on interest rates and employment.