Good morning to the smartest corner of the internet.

Today at 8:30 a.m. in New York, the Federal Reserve’s preferred inflation gauge will publish.

Dow Jones analysts estimate April PCE to rise 2.7% annually, which could give policymakers and markets more confidence for interest rate cuts.

Before that: We’re breaking down what Thursday’s slate of retail earnings says about our shifting spending habits.

Consumers just want cheaper things

When everyone is hunting for bargains, a bumpy economy may just lurk around the corner.

Dollar General reported stellar earnings on Thursday, but Wall Street soured on the stock as shares closed 8% lower.

The retailer is among the select few companies that can see an increase in foot traffic and market watchers grow concerned anyway.

More customers in more stores may sound promising at first, but it’s also a harbinger for an uncertain economic outlook. 

High interest rates and inflation have pushed Americans to seek discounts in places where their cash goes further, such as in lower-priced stores. 

Dollar General’s management said as much on the earnings call.

Price pressures are unlikely “to dissipate as we continue to move forward,” the company said. “So our core consumer is still continuing to figure out her overall spending rates.”

In one sense, economic turmoil helps brands like Dollar General attract more customers.

But it also means shoppers opt for the cheapest options within each store, which can squeeze margins and force the company to add more discounts.

And Dollar General isn’t facing these headwinds in a vacuum.

Shares of Kohl’s saw their worst day ever with a 22% dip after the company reported an earnings miss and downbeat guidance for the year ahead. Executives pointed to weak demand for its clothing and shoes. 

Meanwhile, American Eagle beat expectations but its stock tumbled 8% after the company discussed how consumer demand for discretionary purchases was leveling off. 

Recent earnings suggest “consumer financial malaise is challenging retail sales and causing store operators to maintain a cautious outlook for the remainder of the year,” said senior economist Jose Torres of Interactive Brokers.

Notably, Dollar General, Kohl’s, and American Eagle’s stock dips happened the same day US GDP was adjusted lower to 1.3% from the initial estimate of 1.6%. 

The data suggest that the revision can largely be chalked up to weaker consumer spending — a warning sign echoed by the above companies. 

“Momentum is slowing as consumers struggle with lingering inflation pressures,” said Jeffrey Roach, chief economist for LPL Financial.

“Investors should expect slower momentum in consumer spending to continue throughout the balance of 2024.”

How have your shopping and spending habits changed compared to a year ago? Hit reply to this email or let me know on X @philrosenn.

*At a glance:

Elsewhere:

• Salesforce stock plunged 19.7% on Thursday. It pulled the S&P 500 lower for the fifth day in a row after the cloud computing company missed revenue forecasts for the first time in 18 years. Execs cautioned of slower business in the months ahead. But some see the stock move as an overreaction. (Yahoo Finance)

• Six companies now command 30% of the S&P 500. Microsoft, Nvidia, Apple, Alphabet, Amazon, and Meta account for almost a third of the market-cap weighted index. Never before have a small group of names dominated the stock market to this extent. (Bloomberg)

• US-led sanctions have had unintended consequences. Western sanctions on Russia, Iran, Venezuela, China and others were meant to squeeze those economies by curbing access to certain global markets. But those controls have led to the formation of a shadow economy — led by Beijing. (WSJ)

Rapid-fire:

• The Fed’s preferred inflation gauge, due this morning, is expected to show little progress (CNBC)

• Trump Media stock tumbled as much as 15% after a jury found Trump guilty on all counts (WSJ)

• Subway sold $3.35 billion in asset-backed bonds in the largest securitization deal of its kind ever (Bloomberg)

• Billionaire Bill Ackman will likely back Trump (FT)

• JPMorgan CEO Jamie Dimon warned of turmoil in private-credit markets (Business Insider)

• Saudi Arabia is looking for as much as $12 billion to sell its Aramco stake (Bloomberg)

• Off-brand groceries are gaining popularity as consumers ditch more expensive name-brand products (WSJ)

Last thing:

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