US stocks fall as investors brace for key PCE inflation report

• US stocks ended lower on Wednesday as traders anxiously wait for new inflation data.

• PCE inflation, the Fed’s preferred measure, will be published on Thursday morning.

• The figures will be important in determining the path of interest rate this year.

US stocks slumped on Wednesday as traders eyed upcoming inflation data and continued to assess the outlook for rate cuts this year.

Major averages ended the day with a loss, with the Dow Jones Industrial Average loggging its third straight losing session.

All eyes will be on the Personal Consumption Expenditures index on Thursday, which is the Federal Reserve’s preferred measure of inflation. Economists polled by Dow Jones are expecting consumer expenditure prices to rise 0.3% for the month of January, higher than the prior month’s 0.2% increase.

The data point will be key in determining the path of Fed rate cuts this year, especially if inflation comes in hotter than expected.

“There are good reasons to believe that the assumptions of the market that the PCE will be slightly hotter than last month,” Arnim Holzer, Easterly EAB Risk Solution’s global macro strategist said in a statement. “We continue to think that the Fed’s policy of waiting and watching is valid,” he added.

Investors have been steadily dialing back their expectations for Fed rate cuts this year, as central bankers are looking to keep the lid on inflation. The economy also looks relatively strong, which reduces the need to cut interest rates to avoid a recession, according to Holzer.

Markets are pricing in a near-100% chance the Fed will keep rates steady at its next policy meeting, and see a 57% chance the Fed will only lower rates by 75 basis points or less by the end of the year, according to the CME FedWatch tool.

Here’s where US indexes stood at the 4:00 p.m. closing bell on Wednesday: 

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Here’s what else happened today: 

In commodities, bonds, and crypto: 

• West Texas Intermediate crude oil slipped 0.57% to $78.42 a barrel. Brent crude, the international benchmark, dipped 0.2% to $83.50 a barrel.

• Gold edged lower to $2,042.90 per ounce.

• The 10-year Treasury yield dipped four basis points to 4.27%.

• Bitcoin surged 6.08% to $60,603.

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