The Nasdaq Composite added 0.2% to close at 26,861. The S&P 500 slipped 0.3% and the Dow Jones Industrial Average dropped 0.9%. Only two sectors ended the day in positive territory, technology and communication services, with gains in major technology names helping the Nasdaq outperform the broader market.
August’s personal consumption expenditures (PCE) data offered a relatively mild inflation reading, which supported investor sentiment. Headline PCE prices rose 0.3% over the month, leaving the annual rate unchanged at 3.4%. Core PCE increased 0.2%, coming in under forecasts.
However, the softer inflation data was partly offset by stronger consumer spending. Real consumer spending jumped 0.6%, and second quarter GDP growth was revised up to an annualised 2.2%. Taken together, the figures highlight continued resilience in the US economy.
Bond markets remained a key source of pressure for equities, as that resilience, combined with elevated energy prices, reinforced concerns that interest rates may stay elevated for an extended period. The 10 year Treasury yield climbed 3.8 basis points to 5.29%, a level last seen in 2007. The 30 year yield touched 5.64%, its highest point since 2002.
Even so, expectations of a further Fed hike in October declined sharply. The implied probability dropped to roughly 35%, down from 51% a day earlier.
Meanwhile, oil prices continued to climb. West Texas Intermediate (WTI) gained 1.4% to $90.63 a barrel and Brent rose 0.9% to $103.53, as tensions involving Iran and the Strait of Hormuz stayed at the centre of attention. In this environment, gains in the equity market were concentrated in a small group of stocks, although technology and AI names such as Hewlett Packard Enterprise and Salesforce delivered solid advances.
Global markets
Asian markets rally on chip strength
Most Asian indices traded higher. Japan’s Nikkei led the region with a 2.5% gain as semiconductor stocks rallied on the back of Micron’s results. Markets in South Korea and Taiwan also moved up, helped by strong demand for chips. Softer US inflation reduced expectations of another Fed hike, although high bond yields and oil prices capped the wider rally.
US futures rise overnight
US equity futures moved higher overnight. S&P 500 futures were up 0.45%, Nasdaq 100 futures gained 0.70% and Dow Jones futures rose 0.25%. Micron’s better than expected earnings and outlook boosted the technology and AI trade. Elevated Treasury yields and caution ahead of Friday’s US jobs report kept a lid on broader gains.
European equities end a weak September
European stocks lost 0.5% on Wednesday, weighed down by faster inflation and rising energy costs. Both the STOXX 50 and STOXX 600 closed September down by more than 2%. Energy, food and beverages, and banks were among the worst performing sectors. Technology bucked the trend, advancing 2.5% with ASML and other tech names leading the way.
The dollar extends its gains
The US dollar firmed further, pushing EUR/USD down to approximately 1.1323. Higher Treasury yields and strong oil prices continued to underpin the greenback. The dollar index reached about 101.5, close to its strongest level since April 2025. The softer than expected PCE reading has, however, reduced expectations of an October Fed hike, limiting further dollar gains.
Oil steadies after Wednesday’s rise
Crude prices were largely stable after the previous day’s advance, with Brent at $98.23 and WTI at $90.49 a barrel. A partial recovery in Middle East exports helped ease supply worries, although volumes are still below where they stood before the conflict. Tight markets for refined products and continued uncertainty around the Strait of Hormuz are keeping prices supported.
Fed hike expectations fall
Investors sharply reduced their expectations for an October rate increase after the cooler inflation data and dovish remarks from New York Fed President John Williams. Core PCE rose 0.2% month on month in August, below forecasts, while annual inflation held at 3.0%. Williams said there was “no need for urgency” to tighten policy further.
Company news and analyst views
The following companies saw moves in their share prices driven by analyst ratings, quarterly earnings or other news.
Technology and AI
Micron reported fourth quarter results ahead of expectations and guided to first quarter fiscal 2027 revenue of $61.5bn, comfortably above the consensus forecast. The outlook reflects ongoing AI driven demand for memory products, although a slower pace of sequential earnings growth and lower margins suggest some cooling. The shares were little changed after an early rise in after hours trading.
Apple is set to unveil a new smart home hub on 13 October, together with refreshed HomePod mini and Apple TV models. The devices will run on faster processors and Apple’s improved Siri AI. The hub will use face and voice recognition to tailor content to individual household members, extending Apple’s move into AI powered home products.
TSMC is weighing a possible investment in Texas to increase its US chip manufacturing capacity, according to Reuters, though the plans are still being assessed. Any such investment would come on top of the $265bn already pledged to its Arizona operations, which are set to include 12 fabrication and advanced packaging facilities as well as an R&D centre.
Synopsys and Amazon Web Services agreed a multi year deal valued at over $1 billion, under which AWS will use Synopsys chip designs. The agreement will help AWS build its own processors and AI chips, including Graviton and Trainium. Synopsys will also use AWS cloud services and Amazon’s AI platform to develop AI applications.
Tencent has signed its biggest overseas lease agreement to date with Oracle, reportedly giving it access to around 100,000 advanced AI chips that are not available in China. The deal shows how Chinese technology groups are increasingly relying on computing capacity abroad to meet growing AI and cloud demand while access to high performance chips at home remains restricted.
Google has asked the EU’s General Court to suspend an order that would require it to share search data with OpenAI and competing search engines. Google argues the measure could pose serious privacy and security risks for European users, while the EU says the aim is to increase competition and give consumers more choice.
Oracle shares declined after a report indicated that its AI data centre project in Wisconsin faces major delays caused by power connection problems. Regulatory setbacks could move the start of operations from late 2027 into 2028, with full capacity possibly not reached until 2029. The case underlines the growing power constraints facing AI infrastructure.
Energy and commodities
Constellation Energy gained 2.7% in after hours trading after agreeing a 20 year nuclear power deal with Amazon. The agreement will supply Amazon with 690MW of power and supports more than $3bn of investment at the Calvert Cliffs plant, including a 190MW capacity expansion expected between 2030 and 2032. For Constellation, it secures long term revenue visibility.
Tullow Oil shares dropped by as much as 36% after an International Chamber of Commerce tribunal ruled against the company in a $196.5 million tax dispute with Ghana. The tribunal concluded that the tax assessment and 100% penalties fell outside Tullow’s contractual protections. The company said it was disappointed with the outcome and is reviewing its options.
Healthcare
Eli Lilly announced strong Phase 2 results for EloraTZP, a new treatment for obesity and type 2 diabetes. Patients achieved weight loss of up to 23.3%, against 14.8% for tirzepatide on its own, along with larger improvements in blood sugar control. The study met all of its targets, and Phase 3 trials are planned for the fourth quarter of 2026.
Autos and consumer
BMW set out a restructuring plan centred on AI, fewer management roles and new models, as it deals with weak demand, Chinese competition and US tariffs. The group intends to reduce management positions by 20% by mid 2027. It is targeting automotive margins of 3% to 5% by 2028, rising to 8% to 10% by the early 2030s.
Analyst views
Robinhood received a positive response from analysts following its latest product launches, which they see as a rapid expansion of the platform with potential to increase customer activity and monetisation. Morgan Stanley kept its Overweight rating and $150 price target, while Deutsche Bank reaffirmed its Buy rating and $134 target, calling the update a significant strategic acceleration.
Barclays noted that investors are still overweight equities, but that positioning is less extended than earlier in the year. Equity inflows totalled $81 billion in September, although the pace is slowing and retail sentiment has softened. The bank believes a year end rally may depend on oil prices stabilising, while rising US bond yields are making equities less attractive.
William Blair started coverage of CoreWeave and Nebius with Outperform ratings, pointing to their strong position as AI infrastructure spending picks up. The bank highlighted CoreWeave’s $130 billion backlog and improving contract economics. For Nebius, it cited fast revenue growth, long term commitments from Microsoft and Meta, and a stronger balance sheet to fund its expansion.
Citi downgraded Moderna to Sell from Neutral, even as it lifted its price target to $80 from $60. The bank noted that the stock has gained 222% since positive cancer trial data and argued that the current price already reflects overly optimistic expectations. Citi believes the valuation is difficult to justify, with further gains requiring much higher cancer treatment sales than forecast.
Citi also lowered its price target for Hermès to €1,540 from €1,689 and kept a Neutral rating, citing ongoing weakness in China and a softer French market. It trimmed its 2026 sales growth forecast to 6.4% from 6.8% and reduced earnings estimates by about 1% for 2026 to 2028, expecting weaker demand outside leather goods.
What to watch today
Today’s calendar includes Initial Jobless Claims, the Manufacturing PMI and the ISM Manufacturing PMI. Together, these will give a clearer read on the labour market and factory activity as the economy enters the fourth quarter. On the earnings side, Accenture and Nike are among the most closely watched companies reporting results.
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