Softer August PCE reading lifts Wall Street, trims October rate-hike odds

Federal Reserve faces White House pressure to cut after September rate increase

The Commerce Department’s report showed the personal consumption expenditures price index rose 3.4% on an annual basis in August, against estimates of 3.7% from economists polled by Reuters. The softer-than-anticipated print buoyed hopes that the Federal Reserve might not raise rates as soon as next month.

Wall Street’s three main indexes advanced on the news. At 9:55 a.m. ET, the Dow Jones industrial average rose 50.58 points, or 0.10%, to 51,400.50. The S&P 500 gained 33.17 points, or 0.43%, to 7,704.01. The Nasdaq Composite climbed 193.57 points, or 0.72%, to 26,991.11. Five of the eleven S&P 500 sectors traded higher, with information technology and energy leading gains.

“The market had been tracing out a bullish formation, meaning the price pattern suggested that any positive catalyst could trigger a move higher and that’s exactly what happened,” said Sam Stovall, chief investment strategist at CFRA Research.

Traders reduced the implied odds of an October rate hike to about 35% from roughly 45%, according to data compiled by LSEG. The shift came against the backdrop of a Federal Reserve that raised rates earlier in September for the first time since 2023 and now faces public pressure from the White House to cut.

Separately, second-quarter GDP data — the broadest measure of economic activity — showed the US economy grew at a solid clip, driven by strong consumer spending and business investment linked to the buildout of AI infrastructure. Inflation has emerged as the top issue for voters in the run-up to the midterm elections, with President Donald Trump receiving poor marks for his handling of the economy.

The 10-year Treasury yield held at 5.24% on Wednesday, a day after reaching its highest level since June 2007. Crude oil prices rose on the day, with the December contract for Brent crude futures moving higher.

Despite weakness in September — driven by bond market volatility and elevated oil prices amid the US-Iran conflict — the benchmark S&P 500 and the Nasdaq were on pace for a second straight quarterly advance if Wednesday’s gains held.

On the labor front, ADP, the US’s largest payroll processor, reported that private employers added 90,000 jobs in September, above expectations and up from 36,000 in August. On Friday, the Labor Department will release its monthly jobs tally, which economists expect to show a gain of 84,000 for September, down from 162,000 in the prior month.