US markets mixed as inflation cools Fed rate hike bets

Major United States benchmark indices finished mixed on Wednesday (Thursday AEST), as softer-than-expected inflation data reduced expectations that the Federal Reserve would raise interest rates in October.

The Dow Jones Industrial Average fell 443.9 points, or 0.9%, to 50,906.1, while the S&P 500 declined 19.3 points, or 0.3%, to 7,651.5. The Nasdaq Composite gained 63.5 points, or 0.2%, to 26,861.1.

For September, the S&P 500 fell 0.45%, the Nasdaq rose 1.86%, and the Dow declined 4.29%. The Dow ended a five-month winning streak, while the S&P 500 fell for the third month in four. The Nasdaq advanced for a second consecutive month.

Among the latest economic data, the US Commerce Department reported that the Personal Consumption Expenditures (PCE) Price Index rose 3.4% annually in August, below the 3.7% increase expected by economists polled by Reuters.

Separately, the final reading of second-quarter Gross Domestic Product (GDP) was revised higher to an annualised rate of 2.2%, supported by solid consumer spending and investment that helped fuel the buildout of artificial intelligence infrastructure.

A separate labour market reading showed private employment increased by 90,000 jobs in September, following a downwardly revised increase of 36,000 in August, according to the ADP National Employment Report. The data was the latest in a series of labour market reports released this week ahead of Friday's key government payrolls report.

Market expectations for at least a 25-basis-point rate hike at the Fed's October meeting fell to about 37%, according to the CME Group FedWatch Tool, from roughly 51% in the previous session and nearly 71% a week earlier.

Most megacap and growth stocks moved higher, with Microsoft, Apple and Nvidia gaining 0.8%, 1.1% and 0.5%, respectively.

Among other movers, Hewlett Packard Enterprise climbed 3.9% after the AI server maker raised its long-term revenue growth forecast for its networking business and announced a $1.2 billion deal with Vultr.

On the bond markets, 10-year and two-year Treasury yields rose 1.1% and 0.3%, respectively, to 5.289% and 4.893%.