Stocks were choppy Wednesday as market participants considered what the latest inflation data means for rate hikes. Wall Street also looked ahead to this Friday’s key jobs report, which is expected to show a steady labor market — another important factor in the Federal Reserve’s upcoming policy moves.
Ahead of the open, the Bureau of Economic Analysis (BEA) said the Personal Consumption Expenditures (PCE) Price Index — the Fed’s preferred measure of inflation — rose 0.2% from July to August and was up 3.4% over the year prior.
Core PCE, which excludes volatile food and energy prices, was up 0.2% month over month and 3.0% year over year.
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The inflation data came in better than economists expected, though the monthly increases accelerated from July and the lower year-over-year figures were a result of the BEA’s adjustment to how it calculates several components.
“Even after major methodological revisions, PCE inflation is still running hot however you cut it,” says Sonu Varghese, global macro strategist at Carson Group.
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Varghese also points to the BEA’s final revision to second-quarter gross domestic product (GDP), which showed the economy grew at a 2.2% pace vs the previous estimate of 1.5%.
“The economy is running hot, policy remains easy, and the Fed’s challenge is figuring out how much restraint is needed,” Varghese says. “That’s a tailwind for stocks as we move into Q4.”
Stocks showed resilience in September, and Q4 could be strong
Seasonality is another potential tailwind for stocks heading into the final quarter of 2026.
On Wednesday, the blue-chip Dow Jones Industrial Average closed down 0.9% at 50,906, bringing its September decline to 4.0%. The tech-heavy Nasdaq Composite gained 0.2% today to finish at 28,861, and added 2% on the month. And the S&P 500 slipped 0.3% to 7,651, ending the month down 0.2%.
September has historically been a negative month for stocks, so the fact that the equities market weathered the storm “against the backdrop of a Fed hike and soaring long-end interest rates is emblematic of the insatiable demand for shares of U.S. companies,” says José Torres, senior economist at Interactive Brokers.
“The headwind now switches to a tailwind, with the month before and the five following the midterm election being the best six-month stretch on the four-year election calendar, averaging a 14% gain during midterm years, double the 7% during all years,” explains Mark Hackett, chief market strategist for Nationwide.
September jobs report is on deck
Wall Street will now turn its attention to this Friday’s release of the September jobs report, which is expected to show the U.S. added 84,000 jobs, down from the 162,000 increase in the August jobs report but still a healthy number.
Ahead of this highly anticipated economic report, ADP data showed private payrolls rose by 90,000 in September, well above economists’ forecast of 68,000.
“The combination of reports has strengthened investor confidence that the U.S .central bank may become less hawkish, and it has lifted optimism about the cycle’s ability to manage much loftier interest rates by remaining resilient and avoiding a slowdown,” explains Torres.
According to CME Group FedWatch, futures traders are now pricing in a 65% probability the Fed will keep interest rates unchanged in October — up from 49% one day ago. Odds are still favoring a quarter-percentage-point hike in December.
Moderna stock sinks on new Sell rating
In single-stock news, Moderna (MRNA) shares slumped 5.4% after Citi slapped the red-hot drugmaker with a new Sell rating. Shares are up nearly sevenfold since mid-August on optimism around the company’s new mRNA skin cancer treatment, intismeran, that’s being jointly developed with Merck (MRK, -2.6%).
But Citi analyst Geoff Meacham thinks MRNA has run too far, too fast, and downgraded the healthcare stock following its “outsized run.”
While Meacham admits that intismeran “could become a market-leading therapy in melanoma,” he believes “the re-rating now reflects successful expansion in many tumor types and unrealistic implied sales.”
Most analysts are on the sidelines when it comes to Moderna stock. Of the 23 who are following MRNA tracked by S&P Global Market Intelligence, five say it’s a Buy or Strong Buy, 15 have it at Hold and three call it a Sell or Strong Sell. This works out to a consensus Hold rating.
BofA says these are its top five chip stock picks for Q4
Semiconductor stocks as a group were up slightly on the final day of September, but the iShares Semiconductor ETF (SOXX) ended the month up 11.2%.
And BofA Securities analyst Vivek Arya expects additional gains through the end of the year and into the start of 2027. “Historically, CQ4 (and CQ1) have been the two best seasonal quarters to own chip stocks, with 300-500 basis points of median outperformance vs SPX from 2010-25,” he explains.
His top five chip stock picks for the fourth quarter are:
- Nvidia (NVDA, +0.5), with stock buybacks and multiple GPU Technology Conferences serving as near-term catalysts.
- Intel (INTC, +3.7%), which Arya believes will benefit from agentic CPU strength and foundry wins.
- Marvell Technology (MRVL, +0.4%), which could get a boost from its October 6 Analyst Day.
- Micron Technology (MU, +0.0%), with buybacks beginning on December 9.
- Lam Research (LRCX, +1.4%), which could get a boost from demand for memory and logic chips.