US stocks mixed as inflation data eases rate-hike expectations

The Nasdaq Composite edged higher and the S&P 500 fell modestly on Wednesday, but both indexes recorded a second straight quarterly gain as the August Personal Consumption Expenditures (PCE) price index rose 3.4% year-over-year, below the 3.7% forecast. The softer inflation reading reduced market expectations for a 25-basis-point rate hike at the Federal Reserve’s October meeting, with the probability falling to about 37% from 51% the day before, according to CME’s FedWatch Tool.

The Dow Jones Industrial Average dropped 0.86% to 50,906, while the S&P 500 slipped 0.25% to 7,652 and the Nasdaq added 0.24% to 26,861. Over the month, the S&P 500 fell 0.45%, the Nasdaq rose 1.86% and the Dow declined 4.29%, ending the Dow’s five-month winning streak.

Analysts noted that recent methodological changes in calculating the PCE contributed to the lower figure. > "What the market is focused on is, is the economy continuing to grow and can it manage those higher interest rates? And I would say so far, the market has looked kind of like history that when the economy is growing, when profits are strong, when there's a secular theme, it will look past higher interest rates," said Anthony Saglimbene, chief market strategist at Ameriprise Financial. He added that prolonged elevated rates could eventually hurt bond portfolios and limit credit availability.

Private payrolls rose by 90,000 jobs in September, according to the ADP National Employment Report, reversing a downward revision for August. Fed Governor Lisa Cook reiterated her commitment to reducing inflation without harming the labor market.

Technology shares led gains, with Microsoft, Apple and Nvidia boosting the S&P 500 tech index. Hewlett Packard Enterprise rose after raising its long-term revenue growth outlook and announcing a $1.2 billion deal with Vultr, while Moderna fell after Citigroup downgraded the stock.

Overall, decliners outnumbered advancers on both the NYSE and Nasdaq, and trading volume reached 18.13 billion shares, slightly above the recent 20-day average.