Nasdaq Hits Record as Fed's Preferred Inflation Gauge Falls Short

The Federal Reserve's preferred inflation gauge came in lower than expected, pushing the Nasdaq Composite to a new record high and reducing the likelihood of an October rate hike.

Core PCE, the metric that Fed officials closely monitor, rose 3.0% year-over-year in August, below the forecasted 3.3%. The headline PCE measure also fell short, increasing by 3.4%

The softer inflation data sparked a shift in market expectations, with traders now assigning a 35% probability to an October rate hike, down from previous estimates.

The S&P 500 and Nasdaq Composite both rose on the news, while the Dow lagged behind due to sector-specific factors. Tech stocks, particularly those involved in AI infrastructure buildout, led the gains, reflecting market bets on cheaper money.