Xcel Energy manages utilities serving 3.8 million electric customers and 2.2 million natural gas customers in eight states. Its utilities are Northern States Power, which serves customers in Minnesota, North Dakota, South Dakota, Wisconsin, and Michigan; Public Service Company of Colorado; and Southwestern Public Service Company, which serves customers in Texas and New Mexico. It is one of the largest renewable energy suppliers in the US with more than half of its electricity sales coming from carbon-free energy.

The Fed's favorite inflation indicator, the PCE Price Index, will be released by the BEA this morning. The index differs from the better-known Consumer Price Index (CPI) because its composition is changed frequently and it is quicker to reflect real-time pricing. Through June, PCE inflation was reported at 2.5% year over year; by comparison, the latest CPI report, through July, had inflation at 2.9%. Core PCE, which removes volatile food and energy prices, was at 2.6% in the latest month. Our PCE forecasts call for 2.6% for both the headline and the core reading -- essentially steady month to month as progress toward the Fed's 2% goal gets harder as the target gets closer. Inflation in this cycle peaked in summer 2022 and has been on a fairly consistent downward trek. We track 20 inflation measures on a monthly basis. On average, they are indicating that prices are rising at a 2.8% rate year over year, down 12 basis points versus a month ago. The numbers are volatile and distorted somewhat by ultra-low readings within the Producer Price Intermediate Goods category, which may well be pointing to easing prices across the inflation spectrum in the months ahead. Focusing on core inflation -- which we obtain by averaging Core CPI, market-based PCE Ex-Food & Energy (from the GDP report), the five-year forward inflation expectation rate, the 10-year TIPs Break-even Interest Rate, and the core PCE Price Index -- our reading is 2.62%, down 22 basis points month over month. That's propped up by sticky prices like shelter and transportation. Looking ahead, investors are expecting that the Fed's series of rate hikes ultimately will tame inflation, with the five-year forward expectation rate at 2.25%.

Minneapolis-based Xcel Energy is an electric and natural gas utility with regulated operations in eight Western and Midwestern states. XEL provides generation, distribution, and transmission services and has a generating capacity of about 20,600 megawatts. The company provides utility services to 3.8 million electricity customers and 2.1 million natural gas customers through its regulated utilities. As of 1H24, electricity accounts for about 80% of total operating revenues. In addition to providing power, XEL has pipeline infrastructure and natural gas storage/compression operations. About one-fourth of customers are in the Denver area and are served by subsidiary PSCo. While the company has benefited from favorable regulatory decisions, we note that Colorado gas rates are largely tied to wholesale rates, which can stress overall earnings growth. The company's 2023 fuel mix is: coal, 19%; nuclear, 10%; natural gas, 30%; wind, 32%; solar, 4%; and other/biomass, 4%. XEL is ahead of its competitors in the use of biomass and wood-pellet generation. Management expects to phase out the use of coal by 2034, roughly in line with peers. XEL shares are a component of the S&P 500 and its market cap is $33.5 billion.

Key inflation data is coming this week and AI superstar Nvidia reports earnings. Wall Street will continue to absorb comments from Fed Chairman Jerome Powell from last week, noting that the Fed is ready to start easing monetary policy. The Dow Jones Industrial Average ended last week up 1.3%, the S&P 500 gained 1.5%, and the Nasdaq was higher by 1.4%. Year to date, the DJIA is higher by 9%, the S&P is up 18%, and the Nasdaq has popped 19%. On the economic calendar, inflation data via PCE is the highlight of the week, to be reported on Friday. In June, the PCE (Personal Consumption Expenditures) came in at 2.5%. We see that bumping up slightly to 2.6%. Core PCE came in at 2.6% for June. We see no change for July. Elsewhere, Durable Goods Orders will be reported on Monday. On Tuesday, the Case-Shiller Home Price Index and Consumer Confidence hit the tape, and on Thursday, GDP will be updated. Several Fed officials speak throughout the week. The earnings calendar is winding down, but some important reports remain. On Wednesday, Nvidia, Salesforce, CrowdStrike, HP, and J.M. Smucker all report. Aside from Nvidia's data, analysts will be listening to hear what CrowdStrike management has to say about the global software glitch last month and the impact on business. On Thursday, reports come from Dell, Marvell Technology, Best Buy, Lululemon, Gap, and Ulta Beauty. Earnings are coming in 12.7% higher this quarter than a year ago. Some 95% of S&P 500 companies have reported so far. Financials and Healthcare are the leading sectors, both up 20% for the quarter compared to the same quarter last year. Materials are on the other end, down 6%. Expectations were for 8%-12% earnings growth for 2Q, so corporate America has again surpassed the initial forecast. Mortgage rates fell three basis points (bps) to 6.46% for the average 30-year fixed-rate mortgage. Gas prices fell three cents to $3.38 per gallon for the average price of regular gas. The Atlanta Fed GDPNow indicator is forecasting for 3Q and calls for expansion of 2.0%. The Cleveland Fed CPINow indicator forecasts 2.6% for August CPI. Looking ahead, the next Fed rate decision comes on September 18, with odds at 100% for a rate cut. Of that, 63% expect a 25-bps cut and 37% a 50-bps cut. There are then two more Fed rate meetings this year, the first on November 7 and the second on December 18. We now expect three rate cuts this year, for a total of 75 bps. We see two rate cuts in 2025. We see all cuts in the size of 25 bps.