Softer PCE Data Shifts Rate Expectations, Small-Caps in Focus

Core PCE inflation came in at 3.0% year-over-year for August, below the expected 3.3%, prompting a sharp drop in rate-hike odds for October to 35.6% from over 75% a week ago. Small-cap stocks, which have underperformed large-caps, could benefit as rate sensitivity eases, though Friday's jobs report remains a risk.