S&P 500: Forecast Hangs on PCE Inflation Data and Fed Policy Signals Today

S&P 500 Holds Gains as Traders Brace for PCE Inflation Data

The S&P 500 E-mini futures held firm near 6,666 on Friday, showing little reaction ahead of the highly anticipated August Personal Consumption Expenditures (PCE) report. With recent economic strength challenging the Federal Reserve’s dovish stance, traders are on edge, pricing in the risk that sticky inflation may delay rate cuts.

Will the PCE Print Undermine Rate Cut Expectations?

Forecasts show headline PCE rising 0.3% in August, up from 0.2% in July, while core PCE is expected to slow to 0.21% from 0.27%. But even a mild upside surprise could push back the Fed’s easing timeline.

Revised U.S. GDP data showed Q2 growth accelerating to 3.8%, while initial jobless claims came in below estimates, further clouding the outlook for policy accommodation.

Fed officials aren’t offering much relief. Kansas City Fed President Jeffrey Schmid remarked that inflation “remains too high” and that current policy is only “slightly restrictive,” signaling limited urgency to ease.

Traders have responded by paring back rate cut bets—FedWatch data now puts the chance of an October cut at 85.5%, down from 92% earlier this week.

Are Sectors Reacting to Tariff Risks and Fed Messaging?

Traders are also reacting to renewed tariff threats. Former President Trump proposed a 100% tariff on branded pharmaceutical imports and a 25% levy on imported heavy trucks, lifting Paccar shares by 6% on tariff-shield optimism.

However, broader concerns persist that tariffs may add incremental pressure to core inflation. Goldman Sachs estimates recent tariffs will add 0.10 percentage points to this month’s PCE reading.

Sector-wise, the AI trade is showing signs of fatigue. Oracle is down for the third straight session and Nvidia slipped another 0.6% premarket. Meta also traded lower Thursday.

These names have been bellwethers for the tech rally, and sustained weakness could weigh on sentiment in the Nasdaq, which is already down 1.1% this week.

How Are Indexes Positioned into Month-End?

The S&P 500 is down 0.9% week to date, with the Dow lower by 0.8%. Despite the recent pullback from the 6756.75 high, the S&P 500 E-minis are holding above key support near 6611. A decisive break below that could expose the 50-day SMA at 6534.46. For bulls, reclaiming 6756.75 would be the next upside trigger.

Market Outlook: PCE Data Holds the Key

All eyes now turn to the PCE report. A hotter-than-expected print could reinforce the Fed’s higher-for-longer stance, likely pressuring equities and lifting the dollar further.

Conversely, a dovish surprise might revive rate-cut hopes and support a bounce into month-end. Traders should watch 6611 for near-term S&P 500 support, while any move through 6756.75 would reassert bullish momentum.

More Information in our Economic Calendar.