Inflation cools but markets remain cautious ahead of jobs report

Wall Street received favorable inflation data Wednesday as the personal consumption expenditures price index rose 3.4% year over year in August, below the 3.7% forecast, boosting equities and lowering odds of an October rate hike to 35%. Core PCE, excluding food and energy, increased 3% year over year, also less than anticipated, while Treasury yields moved off multiyear highs. However, stronger-than-expected ADP private payrolls data kept market gains in check, with traders awaiting Friday's jobs report for further Fed policy signals. Wall Street analysts called the data a "goldilocks combination" supporting risk assets, though some warned inflation progress has stalled and September figures will likely rise. Investors remain focused on Treasury yields and potential fourth-quarter rate hikes.