Stocks Steady After Midday PCE Report Confirms Cooling Inflation Ahead of Expected Fed Cut

Next week's Federal Reserve Summary of Economic Projections may be flawed! 👇

U.S. stocks finished Thursday mixed after a historic midday inflation release delivered few surprises and reinforced expectations that the Federal Reserve will cut interest rates next week. At the close, the Dow Jones Industrial Average slipped 31.56 points, or 0.07%, to 47,851.3, while the S&P 500 added 0.11% to 6,857.11. The Nasdaq Composite rose 0.22% to 23,505.1, and the Russell 2000 outperformed with a 0.89% gain to 251.85.

The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures Index, hit markets at 10:00 a.m. ET, marking the first time the release occurred during active trading. Economists had expected an uneventful print that continued the slow disinflation trend seen throughout 2024–2025, and the report broadly aligned with those expectations, helping temper market volatility after an initial flurry of algorithmic trading. According to the preview of the release, core PCE was projected at 2.9% year-over-year, with personal spending cooling to 0.4%.

The report also arrived against a backdrop of open disagreement among Federal Reserve officials. Dallas Fed President Lorie Logan previously warned that “PCE inflation will end the year around 2.9%,” which she viewed as insufficient progress, while Governor Chris Waller countered that “excluding temporary effects, PCE inflation is running 2.5%…I still advocate cutting rates in December.” Those remarks shaped traders’ expectations heading into Thursday, and the largely inline data strengthened the doves’ argument for an imminent rate cut.

Bond markets continued to price in a near-certain policy shift. As noted by Zachary Hill, Head of Portfolio Management at Horizon Investments, expectations for a December rate cut had “plummeted…to less than 30% by mid-November” following the six-week government shutdown and mixed messaging from Fed Chair Jerome Powell. But Hill emphasized that “the odds of a rate cut are back above 90%—which means that during the December 10 Fed meeting, the federal funds rate should be ranging between 3.50% and 3.75%.” The reaffirmation of cooling price pressures in Thursday’s PCE data helped solidify that view.

Commodities and crypto offered mixed signals. Crude oil rose 1.34% to $59.74, and gold futures edged up 0.16% to $4,239.30. Bitcoin fell 0.94% to $92,195.55, while equity volatility eased, with the CBOE VIX closing at 15.99, down 0.56%.

Labor-market indicators added nuance to the macro landscape. Challenger, Gray & Christmas reported that “layoff announcements… climbed 24% in November” compared with a year earlier, bringing total announced cuts to more than 1.17 million so far this year—levels last seen during the 2020 pandemic. Despite heightened public focus on automation, AI-related reductions remained modest, accounting for “6,280 November cuts” and “54,694 so far this year.” Tariff-related cuts tied to the Trump administration reached 7,908 year-to-date.

Corporate news added to the day’s mixed tone. Snowflake shares continued to digest the fallout from this week’s post-earnings drop, despite AI-driven momentum. The company posted 29% product revenue growth and achieved a $100 million AI run-rate, but investors questioned whether such results supported a premium valuation after an 11% slide. Analysts at Jefferies, BofA, Citi, and KeyBanc pointed to accelerating bookings and rising AI adoption but acknowledged that sentiment may remain fragile until growth reaccelerates.

With Thursday’s PCE release now behind them, traders shifted their attention firmly to next week’s Fed meeting. The inline inflation reading reduced the probability of last-minute surprises, but policy makers remain divided, and the meeting’s guidance for 2026 could prove more consequential than the widely expected rate cut itself.