S&P 500 Forecast: SPX rises after cooler-than-expected inflation data

US futures        

Dow futures 0.06%, S&P 500 futures 0.2%  & Nasdaq futures  0.45%

European futures

FTSE -0.04%,  DAX  -0.28%

• US stocks rise after core PCE misses expectations
• Core PCE rises 3% YoY vs 3.3% expected
• Fed October rate hike expectations fall to 37%
• Oil rises from a 3-week low

U.S. Stocks Rise after cooler-than-expected core PCE

U.S. stocks are rising and Treasury yields are falling after data showed that inflation increased at a cooler pace than expected, while U.S. consumer spending rose again in August.

U.S. core PCE, the Fed’s preferred gauge of inflation, remained unchanged at 3% annually, below the 3.3% increase that was forecast but still above the Fed’s 2% target. On a monthly basis, core PCE rose 0.2% in August, below expectations of 0.3%.

Meanwhile, inflation-adjusted personal spending climbed 0.6% in August from a month earlier, marking the largest monthly jump since March 2025.

The data suggests that the U.S. economy remains resilient despite elevated inflation. With the help of a stable jobs market, consumers remain comfortable spending even as prices rise. U.S. Q2 GDP was also revised higher to 2.2% annually, up from the previous reading of 1.5%, while Q1 growth was also revised higher.

Following the release of the data, markets reined in Fed rate hike expectations, which are now down to 37% for a 25-basis-point hike in October, from 70% last week. The key question now is whether cooler inflation can outweigh resilient consumer demand and stronger growth, limiting how quickly the Fed can ease policy even as markets price out an October hike.

Attention will now turn to U.S. jobs data on Friday. Expectations are for another solid month of job creation, with around 100K jobs expected to be added after 162K jobs were added in August.

Corporate Movers

Boeing is up 2% after securing a deal with the Defence Department to develop the next generation of U.S. fighter jets. The contract is worth $20 billion and will see Boeing develop the F/A-XX fighter.

Moderna is falling more than 6% after Citi downgraded the stock to sell. Analysts at the bank have set a price target 60% below Tuesday’s closing price, arguing that the current valuation cannot be justified.

S&P 500 Forecast – Technical Analysis

The S&P 500 trades in a symmetrical triangle pattern and is hovering around 7,700, near the midpoint of the pattern. The price holds above its 50- and 200-day EMAs, keeping the outlook constructive.

Buyers will look to rise above 7,765, the upper band of the falling trend-line resistance, to break out and bring 7,810 and fresh record highs into focus.

On the downside, support is seen at 7,450, the 50 EMA and June high. Below here, attention will turn to 7,575, the rising trend-line support, while a break below 7,500 would create a lower low and open the door to a deeper sell-off towards 7,300.

FX Markets – Dollar Rises, EUR/USD Recovers

The U.S. dollar is easing following the cooler-than-expected core PCE inflation data, which has resulted in markets reining in Fed rate hike expectations and pulling Treasury yields lower. The market is now pricing in just a 37% chance of an October hike, down from 70% yesterday.

EUR/USD is rising on the weaker U.S. dollar and following stronger-than-expected German inflation. German consumer prices rose 3.3% year-on-year in September, up from 2.9% in August and ahead of the 3.1% expected. German retail sales were also stronger than expected, rising 1.3% month-on-month in August after slumping in July.

GBP/USD is rising amid a weaker U.S. dollar and after stronger-than-expected UK GDP data. Figures from the ONS showed that GDP was revised higher to 0.5% in Q2, up from 0.4% in the preliminary reading.

The market is pricing in around 33 basis points of tightening from the Bank of England between now and the end of the year, and more than 100 basis points by the end of 2027.

Oil edges higher from a 3-week low

Oil prices are edging higher after President Trump denied being willing to ease sanctions on Iran, although gains remain limited by optimism over a recovery in Middle Eastern crude supply.

Brent is trading above $90 a barrel, with the December contract around $96, while WTI is near $89. Brent is on track for a 14% gain in September, its strongest monthly increase since July, compared with a 4% rise for WTI.

The Brent-WTI spread is at its widest in four months as markets assess potential U.S. restrictions on diesel exports, which could create an oversupply and encourage refiners to cut crude production.

Meanwhile, Qatar continues diplomatic efforts between Tehran and Washington, but prospects for a breakthrough remain uncertain.

Middle Eastern crude exports recovered to 16.32 million barrels per day in September, just 11% below pre-war levels. With supply recovering, concerns over shortages have eased, limiting upside pressure on prices.