US STOCKS-Wall St set for higher open as soft inflation data eases rate-hike fears

By Shashwat Chauhan and Tharuniyaa Lakshmi

Sept 30 (Reuters) - Wall Street's main indexes were set for a higher open on Wednesday, as a softer-than-anticipated inflation reading buoyed hopes that the Federal Reserve might not hike rates as soon as next month.

A Commerce Department report showed the Personal Consumption Expenditures Price index rose 0.3% in August, compared with a 0.4% increase expected by economists polled by Reuters. Annually, it stood at 3.4% against estimates of 3.7%.

The core reading rose 0.2% on a month-on-month basis versus an estimated 0.3% rise. Annually, it stood at 3% against estimates of 3.3%.

"The market had been tracing out a bullish formation, meaning the price pattern suggested that any positive catalyst could trigger a move higher and that's exactly what happened," said Sam Stovall, chief investment strategist at CFRA Research.

Most megacap and growth stocks ticked higher in premarket trading, with Amazon.com AMZN.O and Apple AAPL.O up slightly, while Alphabet GOOGL.O rose 1.4%. Chip stocks were also broadly higher: Intel INTC.O, AMD AMD.O and Broadcom AVGO.O all rose.

Traders now see a roughly 37% chance of an October rate hike, down from about a 45% chance seen before the data, according to data compiled by LSEG.

At 08:42 a.m. ET, Dow E-minis were up 184 points, or 0.35%, S&P 500 E-minis were up 31.25 points, or 0.4%, and Nasdaq 100 E-minis were up 120.25 points, or 0.39%.

Separately, a final reading of second-quarter GDP showed the US economy grew 2.2%, compared with estimates of 1.5% growth.

Comments from at least four Fed officials, including Minneapolis Fed President Neel Kashkari, are due later in the day.

CHOPPY SEPTEMBER COMING TO A CLOSE

September was marred by immense volatility in the bond markets and elevated crude oil prices due to the ongoing conflict between the US and Iran, igniting inflation concerns and hitting risk assets worldwide.

Despite seeing weakness in September, the benchmark S&P 500 .SPX and the Nasdaq .IXIC were on pace for a second straight quarterly gain, as of last close.

The price-weighted Dow .DJI differed, with the index of 30 blue-chip US companies set for a quarterly fall and on track for its first monthly decline since March.

On Wednesday, the yield on the 10-year Treasury bond eased 2.9 basis points to 5.22%, a day after hitting its highest since June 2007. Crude oil prices rose on the day, with the December contract for Brent crude futures moving higher.

Warnings from leaders of the biggest AI companies earlier this month about the potential existential risks from the technology had also rattled the AI trade, which has been the dominant factor behind Wall Street's rise to record highs this year.

Facebook parent Meta Platforms META.O was the standout performer this month thanks to the popularity of its consumer-focused Muse AI agent, with the stock set for a near 30% jump in September. Shares were down 0.9% on Wednesday.

The next test of the AI trade could be memory-chip giant Micron Technology's MU.O earnings due after the bell.

Among other movers, Boeing BA.N climbed 2.5% after the Pentagon said the plane maker has been selected to build the US Navy's next-generation stealth fighter.

Boeing beat out rival Northrop Grumman NOC.N for the development contract, worth $20 billion. Northrop shares were down 4%.

Moderna MRNA.O dropped 7.9% after brokerage Citigroup downgraded its rating on the biotech company to "sell" from "neutral".