US Stocks End Lower as Investors Downplay Cooler Inflation Data

The US stock market closed lower on Wednesday as investors downplayed cooler-than-expected inflation data. The S&P 500 fell 0.3%, while the Dow Jones Industrial Average plummeted 0.9% to its worst month since March.

The personal consumption expenditures price index rose 3.4% annually in August, down from an initial 3.7% last month, which was later revised down to 3.4%. Core PCE, which strips out volatile food and energy costs, slowed to 3% annually from 3.3% previously.

However, traders remained cautious, with fixed-income markets showing little reaction to the readout. The benchmark 10-year Treasury yield ticked up 1 basis point to 5.27%, remaining near recent multi-decade peaks.

The cooler reading has led to a reduction in bets for a rate hike in October, with the CME FedWatch tool indicating a 37% chance of a hike, down from 51%. David Russell at TradeStation told Bloomberg that 'This is good news for investors worried about the recent surge in bond yields, and it bolsters the case for not hiking in October.'

Meanwhile, the VanEck Semiconductor ETF (SMH) and the iShares Semiconductor ETF (SOXX) rose around 0.5%, tracking gains in Nvidia (NVDA), Micron Tech (MU), and Advanced Micro Devices (AMD). The broader Vanguard Information Technology ETF (VGT) added about 0.9%.

The Nasdaq 100 ended the month about 3.2% higher, thanks to strength in chipmaker stocks such as AMD, Intel (INTC), Arm Holdings (ARM), and Marvell Technologies (MRVL).