US Stocks Fall as Inflation Hits Six-Month High
Hotter-than-expected PCE data and weak consumer sentiment fuel concerns over Fed policy and economic outlook.
Wall Street ended the week on a downbeat note, with major indices sliding after fresh data revealed a troubling acceleration in the Federal Reserve’s preferred inflation gauge. The market sell-off was triggered by a report showing the core Personal Consumption Expenditures (PCE) price index rose to a six-month high, stoking fears that the central bank may maintain its restrictive monetary policy for longer than anticipated.
The core PCE index, which strips out volatile food and energy costs, climbed 2.9% from a year ago, a concerning uptick that challenges the narrative of steadily cooling price pressures. The report was compounded by other signs of economic fragility that weighed on investor sentiment. The MNI Chicago PMI, a key measure of manufacturing activity, came in lower than expected, while the University of Michigan's consumer sentiment index was revised downward, signaling that American households are growing more pessimistic about their financial prospects.
The data cocktail of persistent inflation and waning economic confidence sent a wave of risk aversion through the markets, leading to a broad-based decline in equities. The CBOE Volatility Index (VIX), often called the market's 'fear gauge,' moved higher as investors braced for potential turbulence. The latest figures complicate the path forward for the Federal Reserve, which has been seeking conclusive evidence of a sustainable return to its 2% inflation target before considering interest rate cuts. Investors are now recalibrating their expectations, pushing back the timeline for a potential monetary policy pivot.