The Dow Jones Industrial Average (DJIA) inched higher on Friday, adding roughly 150 points and closing out a moderately bullish week near the 48,000 mark. Although September’s Personal Consumption Expenditures (PCE) Price Index data is significantly delayed, it reinforced market expectations that the Federal Reserve is on track to deliver a third consecutive rate cut on December 10. The S&P 500 also advanced about 0.3%, positioning the benchmark index to retest all-time highs.
PCE inflation cools slightly, supporting expectations for another Fed cut
Core PCE eased to 2.8% YoY in September, while the monthly print held steady at 0.2%. Despite the lag caused by the prolonged US government shutdown, investors welcomed the softer inflation tone, interpreting it as further validation for a year-end rate cut.
Consumer sentiment also improved, with both the University of Michigan’s Sentiment and Expectations Indexes rising faster than anticipated. Meanwhile, one-year and five-year inflation expectations ticked lower, suggesting households are becoming more confident that price pressures will continue to moderate.
Coming up next week: Fed threepeat?
With the Fed’s final rate decision of the year scheduled for Wednesday, broader market momentum may cool in the early part of the week. The meeting will include updated projections in the Summary of Economic Projections (SEP), including the closely watched dot plot – a key gauge of policymakers’ forward-looking rate expectations. Markets will look for confirmation that the Fed remains willing to extend its easing cycle into the new year.
