Dow Jones Industrial Average Retreats After PCE Inflation Uptick

The Dow Jones Industrial Average (DJIA) retreated on Friday, dipping below 45,500 as stocks reacted to a fresh rise in US Personal Consumption Expenditures (PCE) inflation data. Despite the uptick in inflation, investors continue to expect a Federal Reserve interest rate cut in September.

Equities Pull Back but Hold Near Highs

The Dow Jones softened but remains resilient, staying close to its all-time high above 45,760. While bullish momentum has stalled, the index finds intraday support around 45,500, maintaining its near-term gains.

July’s core PCE inflation climbed to 2.9% year-over-year, the highest since March, driven by tariff-related price pressures seeping into broader inflation metrics. This uptick has undone some of the progress made in curbing inflation over the past five months.

Rate Cut Expectations Persist

Despite the inflationary pressure, markets are pricing in nearly 90% odds of a quarter-point rate cut by the Federal Open Market Committee (FOMC) at its September 17 meeting, according to the CME’s FedWatch Tool.

With US employment data showing a sharp decline through Q2, the Fed may feel compelled to cut rates to support the economy, even if inflation remains above its 2% target. Investors are now eyeing the upcoming release of key US employment figures next week, which could further influence the Fed’s decision.