U.S. stock markets traded in a cautious but hopeful mood on Friday, August 29, 2025, as investors braced for the release of fresh inflation data. The Federal Reserve’s preferred gauge—the core Personal Consumption Expenditures (PCE) index—is due shortly and is expected to shape market expectations for September’s policy meeting.
The core PCE, which strips out food and energy prices, remains the most critical inflation measure for Fed policymakers. A softer reading could open the door to long-awaited interest rate cuts, while an upside surprise may fuel volatility across equities, bonds, and currencies.
Optimism Over Fed Rate Cuts
Despite recent market turbulence, signs of optimism are emerging. Many traders now believe the Fed could deliver its first rate cut as early as September. This optimism stems from cooling inflation trends, slowing consumer demand, and a global backdrop of easing monetary policies in Europe and Asia.
Technology Sector Leads the Charge
Tech and growth-oriented sectors continue to drive Wall Street momentum. AI, semiconductors, and software stocks remain in focus, as investors look for high-growth plays that can outperform in both high and low interest-rate environments. Nasdaq futures rose modestly in pre-market trading, supported by upbeat sentiment in these sectors.
- AI and Semiconductor Firms: Demand for AI-driven infrastructure and chips continues to underpin gains, with Nvidia, AMD, and Intel seeing positive pre-market activity.
- Software Sector: Companies like Autodesk and ServiceNow reported strong earnings, beating analyst expectations.
- Fintech Rally: Affirm Holdings saw a sharp after-hours jump following its quarterly results, lifting sentiment in the fintech space.
Market Risks Remain
While optimism is visible, analysts warn that markets remain vulnerable to surprises. A higher-than-expected inflation reading could dash rate-cut hopes, reigniting fears of “higher for longer” policy. Bond yields, already volatile, are likely to swing sharply in response to the PCE release.
Geopolitical tensions, fluctuating oil prices, and uncertainty around U.S. fiscal negotiations also add layers of risk, reminding investors that the path ahead remains complex.
What to Expect Today
Traders should expect heightened volatility once the inflation numbers are out. Short-term opportunities may emerge in tech and growth names, while defensive stocks and bond proxies could gain traction if the Fed maintains a cautious stance.
- Key Watch Level for S&P 500: 5,420 – resistance near recent highs.
- Dow Jones Outlook: Holding above 39,000 will be critical for continued optimism.
- Nasdaq Focus: Tech earnings momentum remains the backbone of investor sentiment.
Overall, Wall Street is likely to remain in “wait and see” mode until the Fed’s inflation gauge provides fresh clarity. For now, cautious optimism prevails.
