Highlights;
- The Dow Jones Industrial Average (DJIA) dipped below 45,500 on Friday, driven by a rise in US PCE inflation figures that met expectations, though it remains near all-time highs.
- Core PCE inflation climbed to 2.9% YoY in July, its highest level since March, signaling persistent inflation pressures.
- Markets continue to anticipate a Federal Reserve interest rate cut in September, with a 90% probability priced in by traders, despite rising inflation.
- Weak US employment data and broader economic concerns may influence the Fed’s decision to cut rates, with key jobs data set to be released soon.
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The Dow Jones Industrial Average (DJIA) dipped lower on Friday, slipping below the 45,500 threshold. The decline followed the release of US Personal Consumption Expenditures (PCE) inflation data, which aligns with market expectations. Despite rising inflationary pressures, market participants remain optimistic about a potential Federal Reserve (Fed) rate cut in September.
The Dow Jones Industrial Average softenend on Friday, retreating below 45,500 as equity markets reacted to an uptick in US PCE inflation figures. However, despite heightened inflation concerns, markets continue to bet on a September interest rate cut by the Fed.
Equities Slip Post-PCE but Remain Resilient
While the Dow Jones dipped, it is far from being out of the game. The index is still clinging to its near-term gains and remains close to its all-time highs above 45,760. Although bullish momentum has waned in the short term, the Dow continues to find support around the 45,500 mark.
US core PCE inflation rose to 2.9% year-over-year in July, marking an escalation in price pressures attributed to ongoing tariff-driven inflation effects. This figure represents the highest reading since March, effectively reversing five months of progress in taming inflation.
Fed Rate Cut Expectations Persist
Market expectations for a Fed rate cut in September remain high, with the CME’s FedWatch Tool indicating an almost 90% probability of a 25-basis-point reduction when the Federal Open Market Committee (FOMC) convenes on September 17.
Despite inflation concerns, the Fed may be compelled to lower rates before achieving further progress toward its 2% inflation target. Weak US employment data for the second quarter, and the potential for further deterioration in hiring trends, could influence the Fed’s decision. The next round of key employment figures is expected later this month.
Read more stock news: Marvell Technology Earnings Signal a Challenging September Ahead
Dow Jones Daily Chart
(Image placeholder: Dow Jones daily chart)
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