Inflation Growth Slows, Sending Stocks Up Early

Published as of: September 30, 2026, 9:13 a.m. ET

(Wednesday market open) On the last day of a quarter dominated by inflation concerns, the August Personal Consumption Expenditures (PCE) price index came in lower than expected at 0.3% monthly for headline and 0.2% for core excluding food and energy. Consensus for the Federal Reserve's favored inflation data was 0.4% and 0.3%. Stocks edged up and Treasury yields eased slightly on the news.

"I don't think that it changes the story with the Fed," said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research (SCFR). "We still expect at least one more hike this year and potentially another either later this year or early next year."

Major indexes fell Tuesday despite lower crude as the U.S. released more inventory. Crude rose early today and is up 42% this quarter. After PCE, chances of an October rate hike stood at 37%, according to the CME FedWatch Tool. Hike odds plunged Tuesday on soft data and as New York Federal Reserve President John Williams said only one more hike "late this year" might be appropriate. However, Friday's nonfarm payrolls, seen at 84,000, looms.

1. PCE deeper dive: Annual core PCE inflation rose 3% in August, below consensus of 3.3% but still well above the Fed's 2% annual goal. Headline annual PCE was 3.4%, in line with estimates. There were some methodological changes to how the government calculated PCE this time, making it more difficult for comparisons, and some analysts said going in that the new methodologies could lead to a lower reading. Diving in deeper, the Fed will likely notice that many prices tracked by the report rose more than it might be comfortable seeing. "The breadth of PCE is still too high for what the Fed likely wants," Howard said, noting that 52% of PCE subcomponents are rising above 3%. Fed Chair Kevin Warsh mentioned breadth this month as a metric he watches. Other data today included a 90,000 jump in ADP September employment, a private sector measure, well above the Briefing.com consensus of 58,000 and August's 36,000. The government's final third quarter gross domestic product (GDP) estimate rose to 2.2% on a quarter-over-quarter annual basis from the prior 1.5%. Personal spending rose 0.9% monthly in August, a strong showing from the consumer.
    
2. Micron earnings approach amid AI crosswinds: As Micron (MU) prepares to report after today's close, chip stocks stumbled on news that OpenAI paused training of its most capable models and halted the rollout of a new one for safety reasons. This contrasts with Nvidia (NVDA) CEO Jensen Huang defending AI safety in high-profile interviews. Meanwhile, Nvidia's $150 billion additional share buyback announcement Monday hinted that chip revenue remains firm, at least for the ones Nvidia makes. Micron makes memory chips, also used in AI, and those face a potential new challenge: tariffs. The Trump administration wants to kickstart domestic memory chip making and is preparing tariffs on imports, The Wall Street Journal reported. Micron and other companies make their chips abroad, and tariffs could intensify an existing shortage, underpinning prices. Options trading forecasts about a 9% move in Micron shares when it reports, and the rest of the AI market could follow Micron's lead. Analysts expect earnings per share of $31.61 on revenue of $51.1 billion. That would mean 350% annual revenue growth, highlighting the importance of memory chips and their high prices.
    
3. Proposed diesel export ban unlikely to cool market: Crude prices fell Tuesday, giving stocks a lift, after The Wall Street Journal reported that flows out of the Middle East reached 80% of pre-war levels. This may be close to what's needed in the near term, considering global demand has fallen sharply since the war began, the newspaper reported. Prices, however, haven't fallen for drivers or transport firms as refinery damage limits production of products made from oil, and the Trump administration's consideration of a diesel export ban likely wouldn't help matters. "A diesel export ban would only provide temporary relief at best," said Michelle Gibley, director of international equity research and strategy at SCFR. "Every barrel of oil produces gas, diesel, and jet fuel. Stopping production of one product stops all of them. With pipelines full, refineries would have to shut down, resulting in an almost simultaneous increase in gas prices, trading one problem for another."

• Moderna (MRNA) fell 7% after Citigroup downgraded shares to sell from the previous neutral rating, citing valuation as shares are up 222% since the results of its cancer vaccine trial.
   
• Boeing (BA) climbed 2.3% as the U.S. Navy chose the company to build its next-generation jet fighter, according to The Wall Street Journal. Shares of Boeing rival Northrop Grumman (NOC), which also competed for the Navy contract, fell 3.9%.
   
• Hewlett Packard Enterprise (HPE) climbed almost 5% ahead of the open after the company raised its fiscal 2027 networking segment revenue growth outlook. The company is hosting a networking investor day.
   
• Concentrix (CNXC) dropped almost 10% on earnings that appeared to disappoint.
   
• The S&P 500 Index starts the last day of the quarter up about 3.1% for the period. The tech-focused Nasdaq-100^® (NDX) is up less than 1% for the quarter, hurt by an 11% quarterly decline in the PHLX Semiconductor Index (SOX).
   
• The August Job Openings and Labor Turnover Survey (JOLTS) came in below expectations Tuesday at 7.08 million, and home prices rose a surprising 2.5% in July. Consumer confidence from the Conference Board in September missed consensus at 81.9, well below 88.6 in August.
   
• Fair Isaac (FICO) plummeted more than 25% Tuesday as Federal Housing Finance Agency Director Bill Pulte said a new mortgage pricing structure will allow direct competition to Fair Isaac's FICO score, Barron's reported.
   
• Bloom Energy (BE) rose 11% yesterday as Morgan Stanley noted that the company bought a new facility to expand operations, indicating strong demand.
   
• Carnival Cruise Lines (CCL) soared 13% and Royal Caribbean (RCL) climbed 7% Tuesday, both helped by strong earnings from Carnival. Strong demand helped offset rising fuel costs, The Wall Street Journal reported.
   
• Nucor (NUE) slipped another 3.4% Tuesday as the steel sector suffered competition concerns after President Trump announced a $15 billion steel plant planned for Iowa.
   
• Bank stocks mostly fell Tuesday and the financial sector is down more than 6% in September. Worries increased lately about investment banking demand, AI competition, and a flattening yield curve.
   
• The percentage of S&P 500 stocks trading above their 50-day moving averages—an important metric for market breadth—is weak at 24% and has fallen almost constantly from the mid-August peak above 70%. The low this year was in March, just below 18%.

What are the Magnificent Seven? This term is talked about often, but what does it refer to, and are these stocks truly worthy of the adjective? Even investors who thought they knew everything about the so-called Mag Seven might learn something from Schwab's new article on these crucial names that form an outsized portion of the S&P 500's market capitalization.

Higher yields are known to weigh on small caps, and that appears to be happening. The Russell 2000^® Index (RUT—candlesticks) is down almost 10% from its mid-August peak, with 10% defining a formal market correction. This comes as the 10-year Treasury note yield (TNX:CGI—purple line) has climbed about 60 basis points since mid-August. Small cap stocks are vulnerable to higher yields because these companies often rely heavily on borrowing. Also, the Russell has a heavy weighting toward financial stocks, a sector bruised in September.

October 1: August construction spending, September ISM Manufacturing PMI^®, S&P Global final September U.S. Manufacturing PMI, and expected earnings from Accenture (ACN), McCormick & Company (MKC), and Nike (NKE).
October 2: September nonfarm payrolls, September unemployment, and August factory orders. 
October 5: September ISM Services PMI^®.
October 6: Expected earnings from RPM International (RPM) and Constellation Brands (STZ).
October 7: Expected earnings from Levi Strauss (LEVI) and Applied Digital (APLD).