[New York Stocks] Treasury Yields Fall as PCE Cools... All Three Major Indices Rise

August PCE Rises 3.4% Year-on-Year
Core Inflation Also Falls Short of Expectations
Probability of October Rate Hike Drops to 35%

As the U.S. Personal Consumption Expenditures (PCE) price increase rate for August came in below market expectations and U.S. Treasury yields fell, all three major indices on the New York Stock Exchange rose simultaneously on September 30 (local time).

As of 10:07 a.m. in New York, the Dow Jones Industrial Average was up 82.91 points (0.16%) from the previous trading day, trading at 51,432.83. The S&P 500 Index, which focuses on large-cap stocks, was up 43.71 points (0.57%) at 7,714.55, while the tech-heavy Nasdaq Composite was up 238.89 points (0.89%) at 27,036.43.

The market on this day showed relief over the PCE data, which is closely monitored by the Federal Reserve (Fed). The U.S. Department of Commerce announced that the August PCE Price Index rose by 3.4% compared to the same month last year. This was lower than the previous month's increase of 3.7% and also below the 3.7% forecast compiled by Dow Jones. On a monthly basis, it rose by 0.3%, in line with expectations.

The core PCE Price Index, which excludes energy and food, rose by 3.0% year-on-year. This represents a slowdown from the previous month's 3.3% and was also below market expectations. The month-over-month increase was 0.2%. The PCE Price Index is used by the Fed as a key indicator to judge whether the 2% inflation target is being met.

As inflation eased, U.S. Treasury yields dropped. The yield on the 10-year Treasury, which had climbed to the highest level since 2007, declined after the indicator was released and traded around 5.23%. The 30-year Treasury yield also fell from the highest level since June 2002. The rise in Treasury yields this month had burdened the stock market, causing the S&P 500 Index to fall 0.2% for September as of the previous day.

Expectations for further rate hikes also weakened somewhat. According to CME FedWatch, the federal funds futures market reflected a 35% probability that the Fed would raise the benchmark rate by 0.25 percentage points in October—a decrease from 51% the previous day. However, the market still expects a possible additional hike in December.

Solid employment and growth data have supported forecasts for further tightening. ADP reported that U.S. private sector employment increased by 90,000 in September, exceeding the market forecast of 68,000. The final figure for real Gross Domestic Product (GDP) growth for the second quarter of this year was also revised upward to an annualized 2.2% from the previous estimate of 1.5%, a 0.7 percentage point increase.

Adam Hetts, Global Head of Multi-Asset at Janus Henderson, told CNBC that although the inflation data was better than expected, it is unlikely that market expectations for an additional rate hike by the end of the year will change, given strong employment and GDP data.

Technology stocks also showed gains. Micron, which is set to release its earnings after the close, rose 1% in early trading, while Nvidia and Alphabet also advanced.

This content was produced with the assistance of AI translation services.