PCE Report Set to Shake US Markets This Week

On Wednesday, US markets face a crucial test as they await the release of July's personal consumption expenditures (PCE) report, which could reset expectations for interest rates and Treasury yields.

The Bureau of Economic Analysis will release the data at 8:30 AM ET. Economists expect core PCE to rise about 0.2% month on month, with annual underlying inflation remaining above 3%.

Fundstrat's Tom Lee considers PCE one of three major hurdles for markets this week, alongside Nvidia earnings and Fed Chair Kevin Warsh's Jackson Hole speech.

Tesla stock could become a direct bet on Treasury yields because its valuation depends heavily on profits investors expect years from now. A hotter core PCE print could push Treasury yields higher, raising the discount rate applied to those future cash flows. Conversely, softer inflation could revive expectations for easier monetary conditions.

Coinbase stock offers a higher-beta route into the inflation trade because PCE can move Treasury yields, the dollar, and expectations for Federal Reserve policy. These moves often spill into Bitcoin and other cryptocurrencies, influencing Coinbase through asset prices and trading volumes.

D.R. Horton faces the most direct economic transmission, as inflation changes Fed expectations, which influence Treasury yields, and long-term yields feed into mortgage rates. Higher financing costs raise monthly home payments and reduce affordability.