US July PCE Inflation Beats Forecast at 3.7% as Nvidia Earnings Loom

The Federal Reserve's preferred inflation gauge came in hotter than expected in July, with the headline PCE price index rising 0.2% month-over-month, above the 0.1% estimate, and 3.7% year-over-year, topping the 3.6% forecast. Core PCE held steady at 3.3% annually, in line with expectations, and rose 0.2% on the month. The data marked the first positive monthly PCE reading since May 2026, returning from a decline of 0.1% in June.

Q2 GDP growth was confirmed unrevised at a 1.5% annualized rate, though the GDP price deflator ran hot at 6.4%, above the 6.2% consensus, raising stagflation concerns. Personal income rose 0.4% against a 0.2% estimate, while real personal spending was flat. Durable goods orders beat at 1.1% versus a 0.5% estimate.

Corporate profits jumped $400.9 billion in the quarter. Markets opened little changed, with S&P 500 and Nasdaq futures each slipping around 0.1% to 0.25% before the bell, and the S&P 500 edged lower after the data crossed. Treasury yields were broadly flat.

Capital Economics said the core PCE reading is unlikely to trigger a September rate hike on its own, but with annual core inflation at 3.3% and growth resilient, the firm believes higher rates may eventually be necessary. Fed officials, including Boston Fed President Collins, had already signaled rates may need to rise absent further disinflation progress. Before the data, markets were pricing roughly a one-in-three chance of a September hike.

All of this set the stage for Nvidia's second-quarter earnings after the close, with investors treating the combination of sticky inflation, sluggish growth, and a high-profile tech result as a critical simultaneous test for equities.