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Nasdaq Composite Slumps as Hotter Leanings in Fed's Preferred Inflation Gauge Hit Technology

4:54 PM ET 08/29/2025 - MT Newswires

The Nasdaq Composite dropped 1.2% to 21,455.55, with the S&P 500 down 0.6% to 6,460.26, and the Dow Jones Industrial Average 0.2% lower at 45,544.88. The industrial sector was also one of the steepest decliners, while healthcare and consumer staples were in the top gainers, reflecting the risk-off mood.

Core personal consumption expenditures, which exclude food and energy, increased 2.9% year-over-year in July -- the largest annual gain since February, as per a Stifel note -- compared with 2.8% in June. Year-over-year, headline PCE inflation rose 2.6% for the second consecutive month, matching the gain back in February.

The super-core PCE measure -- core services excluding shelter -- rose 0.4% in July, the largest monthly gain in five months, according to the Stifel note. On an annual basis, the super-core PCE rose 3.3% in June, marking the largest jump since March.

"Until now, businesses have largely avoided passing on higher costs by stockpiling inventories, substituting away from highly tariffed imports, or absorbing the increases themselves," TD Economics said. "These strategies aren't sustainable indefinitely, and we expect greater passthrough of tariff-related price increases in the coming months."

The University of Michigan consumer sentiment index was revised lower to 58.2 for August from its preliminary estimate of 58.6, versus expectations for no revision in a survey compiled by Bloomberg. The August print lagged the final reading of 61.7 in July.

Importantly, respondents in the Michigan survey expected a 4.8% inflation rate over the next year and 3.5% annual inflation over the next five years, up from 4.5% and 3.4% respectively, in July.

Treasury yields were mixed after midday, with the 10-year yield up 2.1 basis points to 4.23% while the two-year rate slipped 1.6 basis points to 3.62%.

Gold futures climbed 1.2% to $3,517.2, and silver futures surged 2.9% to $40.31.

Strikingly, the odds of a 25-basis-point cut in interest rates in September stood at 87% by Friday afternoon, in line with a day ago, according to the CME FedWatch Tool. The probability of the Fed leaving rates unchanged next month remained unchanged at 13%.

Despite the recent uptick in inflation, some Fed officials have indicated they favor a rate reduction at the next Fed monetary policy meeting in September, the Stifel note said. Speaking at an event on Thursday, Fed Governor Christopher Waller indicated he would support a rate reduction in September and additional cuts over the next three to six months, given potential weakness in the labor market, according to the note.

The ICE US Dollar Index was little changed at 97.79.

In company news, Autodesk (ADSK) shares jumped 8.9%, the top performer in the S&P 500 and the Nasdaq, after the company posted higher fiscal Q2 non-GAAP net income and revenue, and raised its fiscal 2026 outlook.

Dell Technologies' (DELL) shares slumped 8.4%, the steepest decline on the S&P 500, after the company issued guidance for fiscal Q3 adjusted earnings per share below analysts' expectations.

Marvell Technology's (MRVL) shares sank 17%, the worst performer on the Nasdaq, as fiscal Q3 revenue guidance lagged.