US Stocks End Mixed as Softer Inflation Eases Fed Rate-Hike Bets

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The Nasdaq Composite rose 0.24% to 26,861.06, while the S&P 500 slipped 0.25% to 7,651.54 and the Dow Jones Industrial Average fell 0.86% to 50,906.05. The S&P 500 and Nasdaq each recorded their second consecutive quarterly gains — the fifth advance in the past six quarters — while the Dow posted its second quarterly decline in three quarters.

The U.S. Commerce Department reported that the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation gauge, rose 3.4% year-on-year in August, below the 3.7% increase expected by economists polled by Reuters. Core PCE, excluding food and energy, rose 3.0% from a year earlier, also under estimates.

Markets cut the implied odds of at least a 25-basis-point hike at the October meeting to roughly 37%, down from 51% in the previous session and nearly 71% a week earlier, according to CME's FedWatch Tool. Treasury yields moved higher toward the close on expectations of solid economic growth, even as New York Fed President John Williams said this week there was no urgency for an immediate hike.

Growth data also surprised to the upside: second-quarter U.S. GDP was revised up to a 2.2% annualized pace from the prior 1.5% estimate, supported by consumer spending and AI-infrastructure investment. ADP reported 90,000 private-sector jobs added in September, topping the 68,000 consensus, with the official nonfarm-payrolls report due Friday.

Anthony Saglimbene, chief market strategist at Ameriprise Financial, said: “When the economy is growing, when profits are strong, when there's a secular theme, it will look past higher interest rates.”