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Hot PCE Cools Wall Street

Wall Street edged lower after July PCE inflation topped forecasts, raising Fed uncertainty as investors waited for Nvidia earnings and Jackson Hole.

Market Minute
Market Minute

Sep 4, 2026

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Wall Street finished slightly lower Thursday after a hotter-than-expected inflation reading complicated the Federal Reserve outlook.

The moves were small as many investors stayed on the sidelines before Nvidia’s earnings, leaving inflation and AI demand competing for the market’s attention.

What Moved

Thursday, September 3

  • The Dow fell 0.21% to 53,463.88.

  • The S&P 500 slipped 0.02% to 7,675.70.

  • The Nasdaq declined 0.08% to 26,130.20.

  • Annual U.S. inflation rose 3.7% through July.

  • Economists had expected 3.6%.

  • Second-quarter U.S. economic growth came in at 1.5%.

  • Nvidia fell 1.6% before its quarterly report.

  • Healthcare was the weakest S&P 500 sector, down 1%.

  • Moderna dropped 5.8%.

  • Intuit fell 3.2% after forecasting annual revenue below expectations.

  • Meta rose about 1.1%.

  • Apple gained 1.1%.

Why It Moved

The main catalyst was inflation.

July PCE inflation came in at 3.7% from a year earlier, slightly above the 3.6% economists expected. The reading was not strong enough to immediately change expectations for the Fed’s September meeting, but it added another data point suggesting price pressure remains sticky.

Markets put the probability of a September rate hike at 38.1%.

That keeps upcoming economic reports in focus. Morgan Stanley Wealth Management economist Ellen Zentner said the latest reading alone was unlikely to force a move, but additional data pointing in the same direction could increase pressure on the Fed.

Investors were also waiting for Nvidia.

The chipmaker’s results carry unusual weight because markets are using its growth and guidance as a measure of whether AI infrastructure demand remains strong enough to support elevated technology valuations.

Nvidia shares fell 1.6% ahead of the report as traders avoided making aggressive bets before the release.

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Why It Matters Now

Several short-term signals emerged:

  • Inflation remains above the Fed’s comfort zone.

  • A September rate hike is still possible.

  • Fed guidance is becoming more important as data sends mixed signals.

  • Nvidia earnings remain a major test for the AI trade.

  • Strong corporate earnings are helping offset macro uncertainty.

  • Treasury and Fed policy are both influencing the market risk premium.

The market is balancing a resilient economy against persistent inflation.

Second-quarter economic growth came in at 1.5%, while corporate earnings have remained strong enough to keep investors interested in equities. That limits concern about an immediate economic downturn.

The challenge is that firm growth can also make inflation harder to bring down.

That puts more attention on Warsh’s Jackson Hole speech Friday. Investors are looking for clearer signals about how the Fed plans to respond if inflation remains elevated while economic activity stays relatively healthy.

The Treasury market remains part of that equation. High oil prices, rising government debt and inflation expectations pushed yields to multiyear highs before the Treasury announced measures aimed at supporting the bond market.

Geopolitical risk also remains active. Reuters reported that Iran and Oman had reached agreements involving their share of the Strait of Hormuz and its revenue, adding another development to a conflict that has repeatedly influenced oil prices and inflation expectations.

Market breadth showed mild weakness rather than broad stress. Declining stocks outnumbered advancers by 1.16 to one on the New York Stock Exchange and 1.38 to one on Nasdaq.

Trading volume was also light at 14.2 billion shares, below the recent 20-session average of 16.2 billion.

In the immediate window ahead, Nvidia earnings and Jackson Hole are the two clearest catalysts. Strong AI guidance could restore technology momentum. A more hawkish Fed message, especially after the hotter inflation reading, could put renewed pressure on growth stocks and long-term yields.

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