Good morning on this best day of the week Wed, from your Hometown Lender. Let’s dig into today’s market analysis and numbers.

Core PCE came in at 0.2 vs a 0.3 forecast, and the bond market rallied a bit in response. That said, the unrounded number was .247, which about as high as it could be without rounding up to 0.3. Core annual PCE was 3.0, which was flat versus a downward revision from 3.3. More importantly, that downward revision wasn’t mainly about new data collection showing lower prices, but rather a change in PCE methodology. Not all of the methodology change is transparent, but our best estimate is that a vast majority of the 0.3 downward revision was due to methodology changes (the math: 0.361 unrounded drop in y/y core PCE, July vs July, and 0.30 of that drop is in categories that were affected by methodology changes).

Bottom line, inflation was actually fairly flat, and supercore (excludes food/energy/housing) was noticeably higher. Add the stronger ADP and GDP numbers into the mix, and bonds don’t have a lot to celebrate this morning, so merely holding ground is a victory. Bottom line, y/y core PCE was HIGHER in August vs July before both rounded to 3.0%.

Market Analysis – From a higher and better view:

📊 Quick snapshot of market analysis

About two hours into the trading session, it’s a green-but-nervous morning: the Dow is up ~0.1% to roughly 51,419, the S&P 500 is up ~0.4–0.6%, and the Nasdaq is the standout at +0.8–1% (it touched a session high

of 27,096). Small caps are participating too — the Russell 2000 is up ~0.4%. What’s driving it: this morning’s inflation data came in cooler than expected, which took air out of fears the Fed hikes again in October. But the bond market isn’t celebrating — the 10-year Treasury yield, which initially dipped to ~5.20% on the news, bounced right back to ~5.27%, near its 19-year high.

Oil is pushing higher again — WTI up ~1% to ~$91 a barrel — after a reported tanker attack in the Strait of Hormuz. Gold is ~$4,215/oz, Bitcoin ~$84,000–85,000, and the dollar is slightly weaker. (Index and yield figures as of late morning ET; they move.)

September closes in the red for blue chips: the Dow is down ~3.5% for the month (snapping a five-month winning streak), the S&P is roughly flat, and the Nasdaq is up ~1.6%.

📰 What moved markets

• August PCE inflation (the Fed’s preferred gauge, released 8:30 ET): headline rose 0.3% month over month and 3.4% year over year — softer than the 3.7% expected. Core PCE (excluding food and energy) rose just 0.2% on the month and 3.0% year over year vs. 3.3% expected — the slowest core pace since December 2025. One important caveat: the BEA changed how it calculates several components (software, portfolio-management fees, legal services) and revised data back to 2021, so part of the “improvement” is methodology, not new disinflation. The Fed will look through that — and so should we.

• Q2 GDP (final, 8:30 ET): revised UP to 2.2% annualized from the original 1.5% estimate, on stronger consumer spending (revised to +3.8%). Q1 was also revised up, to 2.5%. Translation: the economy was hotter this spring and summer than first reported — which is exactly why the Fed hiked earlier this month.

• Labor-market checks: ADP private payrolls added 90,000 jobs in September (vs. 75,000 expected) — a decent setup for Friday’s official jobs report. The Chicago PMI jumped to 58.8 (vs. 51 expected), the fastest expansion in four months. August personal spending rose 0.9% — the most in five months — though personal income only rose 0.2%.

• Geopolitics: crude pushed higher as Middle East supply stays fragile and a tanker was reportedly attacked in the Strait of Hormuz. Diesel sits near a record $6.53/gallon, per Rosenberg Research — a hidden cost that eventually shows up in shipping, groceries, and everything else

• Corporate: HPE is up 4%+ on a reported $1.2B AI-server deal with Vultr (built on AMD’s Helios rack); Boeing rose on a multi-billion-dollar Navy fighter contract; Micron reports earnings after the close today; Carnival jumped 13% on earnings, while Cal-Maine sank on falling egg prices.

🏦 Fed watch

The cooler PCE and NY Fed President John Williams’ Tuesday remark that there’s “no urgency” for more action have cut October hike odds to ~35% (CME FedWatch), down from 51% Tuesday and 71% a week ago — markets now see about a 65% chance the Fed holds on October 28. Odds of a full half-point of hikes across the year’s final two meetings have been roughly cut in half, to ~28%.

But don’t mistake “skip” for “done”: inflation is still ~3%, well above the Fed’s 2% target, and the economy keeps surprising to the upside — PNC’s chief economist says officials can now tighten “gradually” rather than aggressively. Four-plus Fed officials speak today, including Minneapolis’s Kashkari. Friday’s jobs report (consensus ~90,000 jobs added, unemployment steady at ~4.1%) is the next big input.

🏠 Market Analysis – Mortgage rates and the 10-year

• MBA weekly survey (week ending Sept 25, released this morning): the 30-year fixed averaged 7.30% — up 18 basis points, the sixth straight weekly increase, and the highest since November 2023. Applications fell 6% to their slowest weekly pace since 2025; purchases were down 14% from a year ago and refis down 56%. ARM share climbed to 10.3%, the highest since October 2025 — ARM rates are running roughly 80 basis points below fixed. FHA/VA refi applications fell 13%.

• Freddie Mac PMMS (week ending Sept 24, published last Thursday): 30-year averaged 7.03%, 15-year 6.42%. This week’s survey publishes tomorrow (Thursday).

• Bankrate national average (via WSJ, Sept 30): 30-year 7.34% today, up from 7.11% last week; 15-year 6.70%; 5/1 ARM 6.29%; jumbo 7.43%. Different methodology than the MBA and Freddie Mac surveys — a directional read, not directly comparable. Zillow’s lender marketplace showed 7.36% today, up 12 basis points on the day.

• The 10-year Treasury (~5.27% as of late morning ET) is what ultimately prices mortgages: 30-year fixed rates track the 10-year yield plus a spread for the risk investors take in mortgage bonds. With the 10-year near a 19-year high and the 30-year Treasury at multi-decade highs (~5.58%), the gravitational pull on mortgage rates is upward — today’s cooler inflation only partly offset it. (Intraday MBS pricing wasn’t available from free sources this morning — unverified.)

🏡 Housing

• Realtor.com’s September report (released today): sellers are blinking. The share of listings with a price cut hit 20.8% — the highest September reading since 2018 and the highest of any month since October 2022. Active inventory grew 5.4% year over year to over 1.16 million homes — narrowing the gap to pre-pandemic norms to 9.1%, the first time under 10% in this recovery. Homes under contract fell 4.1% year over year, the steepest drop since March 2025. In plain English: buyers have more leverage than at any point in years — if they can stomach the financing.

• Timing note: Realtor.com pegs THIS week (Sept 27–Oct 3) as 2026’s best buyer window — ~32% more active listings than the start of the year, listing prices ~3.5% below the seasonal peak, buyer competition ~30% below its peak.

• Yesterday’s market analysis still holds: Case-Shiller showed national prices up 1.9% YoY in July but falling in real terms for the 14th straight month; Las Vegas was one of the three weakest markets at -1.3% YoY. Builders keep meeting the market — 38% cut prices in September and two-thirds offered incentives, mostly buydowns and closing-cost credits.

✅ Market Analysis – What this means

For buyers: 7.3%-plus rates are the reality — the MBA survey just printed 7.30%, a near-three-year high. But the market is adjusting in your favor: 1 in 5 listings has a price cut, inventory is at its highest point of the year, and builders are handing out buydowns — negotiate for them. This week is statistically the best buying window of the year. A 2-1 buydown on a new build can mean the difference between a 7.3% first year and something in the 5s — run that math before you assume rates alone decide your payment.

For agents: motivated sellers are your market right now — Realtor.com’s economist notes many sellers today have to sell (relocation, divorce, life events) and are meeting buyers on price. Priced-right, incentive-loaded listings are clearing; stale listings aren’t. The pending-sales decline (-4.1% YoY) is your follow-up list.

For homeowners: refi activity is at its slowest pace of the year — refinancing into these rates makes sense for almost nobody right now. But this is a good week to get rate-alert discipline: if you’re above 7.5%, talk to your lender about what a dip would unlock rather than hoping you’ll notice it. And check the FHFA’s new PMI-removal guidance — with prices still up 1.9% nationally YoY, some of you may be eligible to drop PMI even without refinancing.

🔒 Lock vs. float

I do market analysis, I don’t predict rates — nobody can. But here’s the setup: today’s cooler PCE pulled October hike odds down to ~35%, which is constructive for bonds — yet the 10-year bounced right back to ~5.27%, telling you the market isn’t buying a dovish turn yet.

And Friday’s jobs report can move rates sharply in either direction.

• If you have a contract and the rate works for the deal: lean toward locking. Floating into a jobs-report week with the 10-year at a 19-year high is taking risk you don’t need to take.

• If you’re early in the process with time: you can float with more breathing room — but set a trigger. Decide the rate that makes your deal work and lock the day it appears

• Either way: write down the number that makes your deal work before you see the rate. Decisions made in advance beat reactions made in the moment.

Stay safe and make today great!