• Markets: Like your favorite cocktail, stocks were mixed yesterday. Tech stocks, in particular, got a bump from economic data suggesting the Fed might not need to rush further rate hikes (more on that below). Meta capped off its best month since 2022 as its AI agent app, Muse, proved popular.

CHANGE FOR THE BETTER

Illustration: Morning Brew Inc., Photo: Robert Nickelsberg/Getty Images

Yesterday’s softer-than-expected inflation reading for August and a massive upward revision to Q2 gross domestic product were among the indicators that the economy is humming along—and that a second interest rate hike before 2026 ends may not be as sure of a thing anymore:

• The Fed’s preferred inflation gauge, the personal consumption expenditures price index, rose 0.3% for the month and 3.4% over a year ago. The top-line number is still far above the Fed’s goal of 2%, but below the 3.7% estimate from Dow Jones.
• The core rate, excluding volatile food and energy prices, was 3%, also up 0.3% for the month and below expectations.

Meanwhile, revised data from the Commerce Department showed the GDP rose 2.2% for Q2—up from its original estimate of 1.5%. The US Bureau of Economic Analysis (BEA) also revised another metric the Fed uses to gauge underlying economic trends upward for Q2.

All consuming: Despite a survey from the Conference Board on Tuesday that showed consumer confidence at a near 12-year low in September, consumer spending for the same month was up 0.9%, per the BEA.

What this means for interest rates

Earlier last month, the Fed raised rates to a range of 3.75%–4.00%, the first increase in three years. On Monday, the odds of a second hike in October were 70%, per FedWatch. That fell to 51.5% on Tuesday after New York Fed President John Williams said there was “no urgency” for another rate increase, and it dropped again to 41.5% after yesterday’s data dump.

Big picture: The new data suggests that, despite high oil prices and tariffs adding pressure, the economy remains solid. But there is one area where the numbers are still concerning: the bond market. The 10-year Treasury bond yield hit a 24-year intraday high yesterday.—DL

      

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World

Tour de headlines

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✈️ A disaster was averted on a plane headed for Israel. A FlyDubai flight to Tel Aviv made an emergency landing in Saudi Arabia yesterday after one pilot stabbed another and attempted to crash the plane, Israeli Prime Minister Benjamin Netanyahu said. Details are still being investigated, but the flight data showed a sudden drop in altitude. Passengers and crew members subdued the attacker, and the plane, which had 170 people on board, was able to land safely.