Wednesday's Final Takeaways: PCE Cools, TSM Weighs Texas Investment

Marley Kayden (0:01)

Welcome back to Market on Close. I'm Marley Kayden here in Chicago alongside Sam Vadas at the New York Stock Exchange. Here's some final thoughts on this session today. Inflation came in lighter than expected in August with the headline PCE rising 3 tenths of a percent for the month and 3.4% from a year ago. That was below economist forecasts. Core PCE, which strips out food and energy, rose just 2 tenths of a percent monthly and 3% annually. That was also below expectations. The software inflation data takes some pressure off the Fed to raise rates again in October, although inflation remains well above the Fed's 2% target and consumer spending was strong, rising 9 tenths of a percent in August. We did see an early move higher in the markets immediately following the report, but it did give back those gains throughout the session and we saw the S&P, the Dow and the Russell all close in the red. Also, the FTC opening an inquiry into potential dangers posed by major AI companies. Open AI and Anthropic along with other unnamed companies are being investigated over how they use data and how their business practices may affect competition, putting the rapidly growing AI industry under greater regulatory scrutiny. The probe comes as companies expand across AI models, Cloud computing and enterprise software, raising questions about the safety and the control over data and technology. For investors, the investigation adds another layer of regulatory risk to AI trade that has already attracted enormous amounts of capital and increasingly involves partnerships between AI companies and the biggest technology platforms. This also comes in the wake of Anthropics CEO Dario Amade calling for stronger government oversight and some breaking news to tie in here. We were talking to Kevin Greene about this movie we saw in Alphabet. Alphabet released its Gemini 4 Argon model with the company saying that it is its most advanced AI model yet, but Bloomberg is reporting that there is skepticism among employees about some of its capabilities, particularly when it comes to coding. That led to a small selloff coming into the close, but it has since rebounded after hours. It's up about a percent and a half post-market. But Sam, what caught your eye during the session today?

Sam Vadas (2:10)

A couple of notable stories in the tech space switch were largely overlooked. Taiwan Semi reportedly thinking about a potential investment in Texas to expand chip production in the US. That's according to Reuters, which said this would be in addition to the $265 billion it's already spending in Arizona. The plans apparently aren't set in stone, but Taiwanese media did make mention of this this week as well.

The moves are seen as part of a broader US strategy to de-risk away from Taiwan and set up more manufacturing here in the US to help jobs. And separately, China's DeepSeek says it's teamed up with Huawei to make programming tools for the Huawei's Ascend chips. Now, the AI lab says it's making the software open source and free to download. It comes two weeks after Huawei came out with its next-gen AI processors, and this is being seen as the latest move to deepen partnerships with homegrown Chinese firms as an alternative to NVIDIA and compete with Anthropic and those open AI models as well. But it didn't seem to affect the NVIDIA stock today too much. Marley, heading into tomorrow, though, what are you going to be looking out for?

Marley Kayden (3:18)

We'll get earnings from Nike. I mean, the company has been under enormous pressure this year. They're down more than 44 percent, trading near its lowest levels in more than a decade. Wall Street's looking for EPS of 44 cents on revenue of $11.7 billion.

The report likely less about whether they can beat those numbers and more about whether Elliott Hill's turnaround is beginning to show up in sales stabilization and in gross margin improvement. Sam, of course, focused on North American sales after a long period of weakness and greater China as a potential pressure point for Nike. That one's of note to me. What will you be watching for?

Sam Vadas (3:54)

Looking out for those PMIs, particularly because the S&P Global Flash data last week did send those 10-year yields higher. And of course, that isn't something that typically happens. So we'll see what the official numbers tell us and that final read on S&P as well. That'll be accompanied by more Fed speak. So let's see what they have to say, particularly off the back of the PCE earlier this morning. And how is it? October already, a new month, a new quarter. We turn the page. They say, Marley, that it's meant to be a better month than September. We'll see.