Stock Buyers Step In as Data Keep Fed Bets in Play: Markets Wrap

This content was published on September 26, 2025 - 21:00

10 minutes

(Bloomberg) — A renewed wave of dip buying lifted stocks in the final stretch of the week after a key inflation gauge matched expectations, giving the Federal Reserve some breathing room to address labor-market cooling.

Following a three-day slide, the S&P 500 rebounded. The response to the data was fairly muted in the bond market, and swap traders continued to price in around 40 basis points of Fed cuts before the end of 2025. The dollar fell.

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A report Friday showed the personal consumption expenditures price index excluding food and energy rose 0.2% in August, compared with 0.3% in July. On an annual basis, the core measure remained at 2.9% – above the Fed’s target.

“Despite another month of elevated inflation, today’s PCE report was in-line across the board,” said Bret Kenwell at eToro. “That gives investors some relief that the current status quo will remain intact, and that the Fed will remain on track to cut rates two more times this year.”

Kenwell also says that the Fed’s 2% inflation goal seems to be a “low priority” right now, with policymakers trying to restore balance between jobs and inflation.

Fed Chair Jerome Powell pointed to a cooling labor market to explain why officials lowered rates in September, while remaining vigilant on inflation.

“Inflation may not be reversing, but it’s not reaccelerating,” said Ellen Zentner at Morgan Stanley Wealth Management. “Barring a major upside surprise from next week’s jobs report, the Fed should remain on course to deliver another rate cut in late October.”

Fed Bank of Richmond President Tom Barkin told Bloomberg Television that while unemployment and inflation have both moved away from the goals, he sees only limited risk of further deterioration.

Despite a slide in consumer sentiment, Friday’s data also showed US personal spending rose by more than forecast — illustrating resilience.

“Today’s data reinforces yesterday’s ‘gee-the-economy-is-much-stronger-than-anyone-thought’ narrative, but at the same time, there’s less to worry about on the inflation front,” said Chris Low at FHN Financial.

Actions speak louder than words and consumers continue to spend, which is why corporate profits continue to exceed expectations, according to Chris Zaccarelli at Northlight Asset Management.

“The bull market is going to continue as long as consumers remain employed and continue to spend, and corporations are able to adjust and adapt to the conditions on the ground,” he noted.

“Following a three-day pullback in the broader market, this is good enough to pull buyers off the sidelines,” said David Russell at TradeStation. “Today’s PCE calms some of those worries. No news is good news.”

While inflation likely gets the headline in today’s data, the income and spending numbers may be more important, according to Scott Helfstein at Global X.

“This likely sustains strong consumption and possibly leads to better than expected third-quarter growth,” he noted.

At Janus Henderson Investors, Greg Wilensky says continued strength in overall economic activity and a Fed that remains likely to lower rates will likely provide support for risk assets.

That’s despite valuations that, on the surface, appear expensive, he said.

The S&P 500’s 12-month forward price-to-earnings ratio recently touched a high of 22.9, a level that this century was exceeded in just two prior instances: the dot-com bust and the pandemic rally in the summer of 2020 when the Fed reduced rates to near zero.

Read: S&P 500 7,000 Target Might End Up ‘Too Low,’ BMO’s Belski Says

While cutting rates in non-recessionary environments tends to be good for US stocks, markets could use a bit of a breather as we enter the fourth quarter and as certain pockets of the market are seeing some euphoria, noted Kenwell at eToro.

“Should a pullback materialize in October, it could be the dip that refreshes the rally and gives investors a more attractive entry point into the market,” he said.

After one of the strongest stretches for equities since April, the S&P 500 is showing natural signs of fatigue, according to Mark Hackett at Nationwide. Yet positioning and sentiment remain far from extreme, suggesting investors are more cautious than complacent.

“With fiscal stimulus, a potential dovish Fed shift, and a softer dollar all looming as catalysts, any near-term test of technical support should be seen less as a reversal and more as setting the stage for the next leg of the bull run,” he said.

Looking ahead, traders will be closely watching news regarding the funding stalemate in Congress.

President Donald Trump on Friday shrugged off the threat of the first US government shutdown in nearly seven years and moved to cast the blame for any disruption on Democrats.

In the event of a federal government shutdown, the September jobs report — due next Friday — will be delayed if the Department of Labor adheres to an operational contingency plan spelled out earlier this year.

“Government shutdowns tend to inject volatility but typically don’t have a lasting market impact,” wrote Keith Lerner at Truist Advisory Services.

The benchmark S&P 500 has barely moved on average during the last 20 shutdowns, according to Truist.

“The looming government shutdown may spark short-term volatility, although historically government shutdowns are not significant market-moving events as they tend to be averted last minute or resolved quickly,” said Clark Bellin at Bellwether Wealth.

As we wrap up September, stocks are defying their historical weakness, Bellin noted, “although that doesn’t mean that October will be smooth sailing, as October is a month with a volatile reputation.”

Corporate Highlights:

Apple Inc. has developed a ChatGPT-like iPhone app to help test and prepare for a long-anticipated overhaul of Siri coming next year, according to people familiar with the matter. Electronic Arts Inc., the video-game company behind popular football and soccer titles, is close to a deal to go private, the Wall Street Journal reported, citing people familiar with the matter. Intel Corp. and GlobalFoundries Inc. rallied after the Wall Street Journal reported that the Trump administration is weighing a new plan to reduce US reliance on chips made overseas. The $14 billion valuation that the Trump administration has estimated for TikTok’s US business falls well below projections, surprising investors who say a deal at that price would be a bargain for potential buyers including Larry Ellison’s Oracle Corp. and partner Silver Lake Management LLC. Meta Platforms Inc. will soon offer paid versions of Facebook and Instagram in the UK that will remove advertising from both platforms. Drugmakers rose as President Donald Trump’s plan to impose a 100% tariff on branded and patented drug imports was greeted with a shrug by many investors — who are betting his exemptions for companies with US manufacturing will soften any blow. Shares of truck maker Paccar Inc. climbed as Trump announced new industry-specific tariffs that include a 25% levy on heavy trucks. Analysts say the company will benefit because it has significant US production. Trump on Friday intensified his campaign against Tylenol to include young kids, posting on his Truth Social that parents shouldn’t give children the drug “for virtually any reason.” Furniture retailers fell as Trump announced the US will enact new tariffs on imported kitchen cabinets, bathroom vanities and other home products next week. Boeing Co. and the union representing striking defense workers have agreed to resume negotiations with a federal mediator in a bid to end a nearly eight-week work stoppage. Boeing will regain more powers from regulators to conduct final safety checks and issue airworthiness certificates for some 737 Max and 787 jets prior to delivery, easing restrictions put in place after a series of manufacturing lapses. Uber Technologies Inc. sees its grocery and retail deliveries growing faster than expected, underscoring the company’s effort to catch up with rival services from Instacart, DoorDash Inc. and Amazon.com Inc. Just weeks after a buzzy trading debut, Klarna Group Plc shares fell below the initial public offering price for the first time in the face of increased competition from rivals and worries about the path of interest rates. PG&E Corp., which filed for bankruptcy in 2019 following devastating blazes, was upgraded to investment grade by Fitch Ratings after the California legislature boosted the size of a fire insurance fund. TeraWulf Inc. is expected to raise approximately $3 billion to support the build-out of its data centers via a structure supported by Google Inc., according to Patrick Fleury, the crypto miner’s finance chief. Switzerland’s government formally proposed giving UBS Group AG seven years to fully comply with higher capital requirements, confirming previous guidance. BMW AG is recalling at least 331,000 vehicles globally due to a defect in its starter motor, another such setback for the German carmaker that’s been hit by costly product flaws What Bloomberg Strategists say…

“The latest data batch confirms that US consumers are taking labor-market headwinds in stride for now. That clears the path for stocks to push higher into year-end.”

—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.

Some of the main moves in markets:

Stocks

The S&P 500 rose 0.6% as of 3 p.m. New York time The Nasdaq 100 rose 0.4% The Dow Jones Industrial Average rose 0.8% The MSCI World Index rose 0.6% Bloomberg Magnificent 7 Total Return Index rose 0.7% The Russell 2000 Index rose 0.8% Currencies

The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.3% to $1.1703 The British pound rose 0.5% to $1.3410 The Japanese yen rose 0.2% to 149.43 per dollar Cryptocurrencies

Bitcoin rose 0.6% to $109,841.81 Ether rose 4.1% to $4,048.66 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.18% Germany’s 10-year yield declined three basis points to 2.75% Britain’s 10-year yield declined one basis point to 4.75% The yield on 2-year Treasuries declined one basis point to 3.64% The yield on 30-year Treasuries advanced two basis points to 4.76% Commodities