Major U.S. indices rose in early trading as investors positioned for the December Personal Consumption Expenditures (PCE) inflation report, with the S&P 500 up 0.7% and Nasdaq Composite advancing 0.9%. Traders are closely monitoring expectations for core PCE inflation to remain steady at 2.8% year-over-year.
- S&P 500 up 0.7%, Nasdaq Composite up 0.9% ahead of PCE data release
- Core PCE inflation forecasted at 2.8% year-over-year
- 10-year Treasury yield fell to 4.52% amid reduced rate hike expectations
- Markets expect rate cuts to begin as early as mid-2025 if inflation cools further
- Futures indicate potential 0.6% move in S&P 500 post-release
- Tech and consumer discretionary sectors led early gains
Markets opened higher on Friday as anticipation built ahead of the release of the December Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation. The S&P 500 climbed 0.7%, while the Nasdaq Composite gained 0.9%, driven by strength in technology and consumer discretionary sectors. Investors are weighing whether the latest data will confirm persistent inflation or signal progress toward the Fed’s 2% target. The core PCE inflation rate, excluding food and energy, is expected to hold at 2.8% annually, a figure that would maintain pressure on the Federal Reserve to keep interest rates elevated. A reading above 3.0% could reignite speculation about additional rate hikes in 2026, while a dip below 2.7% might prompt market bets on rate cuts as early as mid-2025. The current consensus forecasts suggest a modest moderation in underlying price pressures, but the margin remains tight. Equities across sectors responded positively to the pre-data optimism, with tech stocks leading gains as bond yields edged lower. The 10-year Treasury yield declined to 4.52%, reflecting reduced expectations for aggressive monetary tightening. Financials also posted gains, though with more moderate movement compared to growth-oriented sectors. Market participants remain cautious despite the rally, aware that volatility could spike immediately after the PCE release at 8:30 a.m. ET. Futures on the S&P 500 indicated a potential move of up to 0.6% following the data, highlighting the sensitivity of asset prices to inflation outcomes. The outcome of this report may influence Federal Reserve policy decisions through the remainder of 2025.