US Inflation Cools as Nasdaq Outperforms & Micron Beats Estimates

US inflation data came in softer than expected, affecting expectations for the Federal Reserve’s next interest-rate decision as US equities closed the month with mixed results. Technology shares remained comparatively resilient, while Micron Technology reported quarterly revenue and earnings above Wall Street forecasts amid continued demand linked to artificial intelligence infrastructure.

TL;DR

• US core PCE inflation cooled: Core PCE rose 3.0% year-on-year in August, below the 3.3% consensus estimate cited by CNBC.

• Fed expectations shifted: The softer inflation reading reduced market-implied expectations for another 25-basis-point Federal Reserve rate increase in October, according to Yahoo Finance.

• US stocks ended mixed: The Nasdaq Composite gained 0.2% on 30 September, while the S&P 500 fell 0.3% and the Dow declined 0.9%, according to Yahoo Finance.

• Tech outperformed in September: The Nasdaq gained 1.8% for the month, contrasting with declines in the S&P 500, Dow and Russell 2000.

• AI remained a key market theme: Semiconductor and AI-linked stocks helped support technology shares despite higher US Treasury yields during September.

• Micron beat expectations: Micron reported fiscal fourth-quarter revenue and earnings above analysts’ forecasts and provided stronger-than-expected revenue guidance for the following quarter, according to Yahoo Finance.

Key developments

The Federal Reserve’s preferred inflation measure showed that the core Personal Consumption Expenditures (PCE) price index, which excludes food and energy, increased 0.2% month-on-month in August and 3.0% from a year earlier. The annual figure was below the 3.3% Dow Jones consensus forecast. Headline PCE rose 0.3% on the month and 3.4% year-on-year, with the annual reading also below the 3.7% consensus estimate.

The softer inflation data influenced expectations surrounding the Federal Reserve’s October meeting. The inflation figures therefore became an important factor for markets assessing the path of US monetary policy following the Fed’s September rate increase. (Source: CNBC)

US equities nevertheless finished 30 September on mixed ground. The technology-heavy Nasdaq Composite gained 0.2%, while the S&P 500 declined 0.3%. The Dow Jones Industrial Average dropped 0.9%, or more than 400 points. The session followed an initial rise in stocks after the inflation report, with technology shares ultimately providing the strongest performance among the major indices.

September as a whole also highlighted a divergence between technology shares and the broader US market. The Nasdaq Composite gained 1.8% during the month after reaching a new peak on 22 September. By comparison, the S&P 500 fell 0.4%, the Dow declined about 4.3% and the Russell 2000 dropped 5.4%. Yahoo Finance attributed much of the Nasdaq’s relative strength to AI-linked and semiconductor shares, including Meta and AMD.

The month’s equity performance occurred alongside a significant increase in US Treasury yields. Yahoo Finance reported that both two-year and 10-year Treasury yields rose by roughly half a percentage point during September, while the 30-year yield increased by nearly 40 basis points. Rising bond yields placed additional pressure on equities even as AI-related stocks continued to support technology benchmarks..(Source: Yahoo Finance)

Micron earnings underline AI memory demand

Micron Technology added another corporate focus after the US market close, reporting fiscal fourth-quarter earnings and revenue above analysts’ expectations. The memory-chip producer posted earnings per share of $33.42 on revenue of $54.23 billion, compared with Bloomberg consensus forecasts cited by Yahoo Finance of $31.83 per share and $51.49 billion in revenue.

Micron also issued stronger-than-expected forward guidance, projecting revenue of $60 billion to $63 billion for its next reported quarter, compared with an analyst estimate of $56.77 billion cited by Yahoo Finance. Demand for DRAM, high-bandwidth memory and flash storage used in data centres and AI processors has supported the company’s business as investment in AI infrastructure has expanded.

The results came against a broader backdrop of strong AI-related investment. Yahoo Finance reported that UBS chief economist Arend Kapteyn estimated AI-related investment and the wealth effects associated with rising AI shares were accounting for 80% or more of US economic growth. UBS had also increased its estimate for AI-related capital expenditure next year by $200 billion to $1.4 trillion, according to the report. These figures represent UBS estimates rather than realised economic outcomes.

The combination of softer core inflation, shifting Federal Reserve expectations and continued strength in selected technology and semiconductor shares left US markets with a mixed picture at the end of September. The Nasdaq’s monthly gain contrasted with declines in the S&P 500, Dow and Russell 2000, while Micron’s results provided further evidence of strong demand for memory products associated with AI infrastructure. (Source: Yahoo Finance)

*Past performance does not guarantee future results. The above is for marketing and general informational purposes only, and these are only projections and should not be taken as investment research, investment advice or a personal recommendation.