US stocks recorded gains on Wednesday, the last day of September, after new economic data revealed a slowdown in inflation in August. This led to a decrease in Treasury yields, according to CNBC. The Dow Jones Industrial Average rose by 84 points, or approximately 0.2%. The S&P 500 index climbed 0.6%, while the Nasdaq composite increased by about 1%.
The Personal Consumption Expenditures (PCE) price index for August showed an annual increase of 3.4%, down from 3.7% in the previous month. Economists surveyed by Dow Jones had expected inflation to remain steady at 3.7%. The core PCE index, which excludes food and energy, rose 3% annually, decreasing from 3.3% in the previous month and below economists' expectations.
The data had a limited impact on the bond market, with the 10-year Treasury yield rising by one basis point to 5.27%, remaining close to its highest level in nearly two decades. The 30-year Treasury yield increased by three basis points to 5.622%. Market attention is now focused on the upcoming jobs report, expected to show 84,000 non-farm jobs added in September, roughly half the number added in August.
The probability of the Federal Reserve raising interest rates has decreased, according to the CME's FedWatch tool, which shows a 35% chance of a quarter-point rate hike next month, down from 51% the previous day. However, traders still expect another rate increase in December, despite today's lower inflation data.
The S&P 500 and Nasdaq composite indices were positively impacted by the data, with the S&P 500's sectors mostly rising. The Dow Jones Industrial Average's gains were limited, but it still managed to close higher. The market's reaction suggests that investors are cautiously optimistic about the inflation data and its potential impact on future interest rate decisions.
Economists have noted that the inflation data is a positive sign for the US economy, as it suggests that price pressures may be easing. However, they also caution that the data is not yet conclusive and that the Fed will likely continue to monitor inflation closely. The central bank has emphasized its commitment to bringing inflation back to its 2% target.
The US economy has shown resilience in the face of high inflation and interest rates, with consumers continuing to spend and businesses investing in growth. The upcoming jobs report will provide further insight into the economy's performance and may influence the Fed's future policy decisions.
Key points
- US stocks rose on Wednesday, driven by data showing inflation slowed in August.
- The probability of a Federal Reserve interest rate hike has decreased.
- Market attention is now focused on the upcoming jobs report.
