Thursday’s PCE report was everything investors could have hoped for—it just wasn’t enough to lift the stock market, which opened lower. It’s a reminder that earnings matter more for the market than inflation right now.
September’s PCE reading contained no warnings to investors, who have recently fretted that a rise in bond yields could be signaling a reacceleration in inflation. The headline number came in at 2.1% year-over-year, while core rose 2.7%, right in line with expectations. The odds of a quarter-point rate cut in November ticked slightly higher to 96.07%, from 95.22% on Wednesday.
Inflation, however, isn’t the market’s big concern right now. As those odds suggest, the Fed is almost certainly going to cut again, and it would take a massive surprise in Friday’s payrolls report to change that narrative.