PCE data meets expectations but tech giants plunge across the board: Why are risk assets under widespread pressure?

On June 25, 2026, the U.S. Bureau of Economic Analysis released the Personal Consumption Expenditures (PCE) price index for May. The data showed that the overall PCE price index rose 4.1% year-over-year in May, up from 3.8% in the previous month, marking the first time it has broken above the 4% threshold since April 2023 and reaching its highest level in over three years. Excluding food and energy, core PCE rose 3.4% year-over-year, up from 3.3% in the prior month, hitting its highest level since October 2023. On a month-over-month basis, overall PCE rose 0.4%, while core PCE remained at 0.3%.

The core characteristic of this data is "in line with expectations but stubborn in direction." The market's median forecast for May's core PCE year-over-year was 3.4%, and the median forecast for overall PCE year-over-year was 4.1%, with the actual reading closely aligning with Wall Street expectations. However, the data being "in line with expectations" did not bring calm to the markets—quite the opposite: inflation is climbing slowly but steadily upward, rather than retreating toward the Federal Reserve's 2% target.

More noteworthy are the structural signals. The continued rise in core PCE means that even excluding the energy disruptions caused by the May U.S.-Iran conflict that pushed up oil prices, "core inflation" in the U.S. is still accelerating. The final first-quarter GDP figure was revised up to 2.1%, and May's personal income and spending monthly rates both came in at 0.7%, beating market expectations of 0.4% and 0.6%, respectively. Economic resilience combined with inflation stickiness is creating a policy dilemma that makes it difficult for the Fed to ease.

Inflation reading in line with expectations, yet why is the market more cautious?

Data that is "in line with expectations" should theoretically be digested by the market—but the reality is the opposite. Following the release of the May PCE data, market pricing for Fed policy quickly turned hawkish. The CME FedWatch tool showed that after the data release, the market's probability expectation for a September rate hike jumped from 52% before the data to 85.1%, while expectations for a rate cut in 2026 were "zeroed out." The U.S. Treasury market simultaneously sent a clear signal: the 10-year Treasury yield rose 8 basis points in a single day to 4.42%, and the 2-year Treasury yield rose 12 basis points to 4.55%, with short-term rates rising faster, directly reflecting the heightened expectations of rate hikes.

The core logic behind market caution lies in the direction of the "expectation gap." Before the data release, there was still a faint hope in the market that "inflation might have peaked"; after the data landed, the reality of core PCE hitting a new high since October 2023 completely eliminated any possibility of a rate cut this year. The dot plot from the Fed's June meeting already showed that 9 officials expect rate hikes in 2026, with 6 of them expecting more than one hike. The May PCE data is precisely the first validation of this hawkish shift.

Additionally, the structural spread of inflation is alarming. Core services inflation excluding housing rose 4.2% year-over-year, the most stubborn component since 2022; average hourly wages rose 3.9% year-over-year in May, moving in tandem with core PCE, creating a "wage-price spiral" risk. Inflation is no longer just a transmission issue of energy prices but is becoming embedded in the underlying structure of the U.S. economy.

Tech stocks fall across the board and the industry logic behind Apple's 6% drop

The three major U.S. stock indices showed clear divergence after the data release. As of the close on June 26, the Dow rose 0.14% to 51,920.62 points, the Nasdaq fell 0.46% to 25,358.60 points, and the S&P 500 was nearly flat at 7,357.49 points. The Nasdaq has fallen for four consecutive trading days, with large-cap tech stocks continuing to face pressure.

The "Magnificent Seven" tech stocks all declined: Apple fell 6.12%, its largest single-day drop since April 2025; Microsoft fell 3.46%, Amazon fell 3.10%, Meta fell 2.65%, Nvidia fell 1.64%, Alphabet fell 0.83%, and Tesla fell 0.11%. The Wind U.S. Magnificent Seven Index overall fell 2.75%.

The direct trigger for Apple's sharp drop was the surge in storage chip costs. Apple CEO Tim Cook said that due to violent fluctuations in memory and storage market prices, price increases are inevitable. AI-driven demand has disrupted the original supply-demand balance, and Apple can no longer rely on its procurement scale advantage to secure preferential pricing. As a result, it has to pass some costs on to consumers. Apple announced price increases for Macs and iPads, with the highest increase reaching $300, directly raising market concerns about product sales volumes and profit margins.

This event reveals a structural contradiction in the current tech industry: the frenzied demand for AI infrastructure is pushing up upstream storage chip prices, while downstream consumer electronics manufacturers, in an inflationary environment, are unable to absorb the costs. Memory leader Micron Technology surged 15.74% due to strong earnings, and SanDisk soared 21.97%—the "ice and fire" scenario of upstream euphoria and downstream pressure is a true reflection of the current tech industry chain.

How inflation expectations suppress risk asset valuations through the rate path

The core transmission mechanism of PCE data's pressure on risk assets is the "repricing of rate expectations."

When the market prices the probability of a September rate hike above 85%, the rise in the risk-free rate (Treasury yields) directly raises the discount rate for all risk assets. For tech stocks, whose valuations are highly dependent on future cash flows, the valuation compression effect from a rising discount rate is most pronounced. The concentrated decline in high-valuation tech stocks like Apple and Microsoft is a direct reflection of this valuation logic.

The simultaneous strengthening of the U.S. dollar further exacerbates the pressure. Heightened rate hike expectations push the dollar index higher, adding additional pressure on dollar-denominated risk assets. Meanwhile, the 10-year Treasury yield rising to 4.42% means that "risk-free returns" have become quite attractive, with the momentum for funds to shift from risk assets to safe assets continuing to strengthen.

More importantly, the market is shifting from a debate over "whether inflation has peaked" to pricing in "higher for longer." The Fed's dot plot raised the median overall PCE inflation forecast for end-2026 from 2.7% to 3.6%, and core PCE from 2.7% to 3.3%. This means policymakers themselves believe the timeline for inflation to return to the 2% target is lengthening. For risk assets, "higher for longer" is the least favorable policy combination—high financing costs, tightening liquidity, and valuation pressures all acting simultaneously.

Bitcoin falls below $60k: The interplay of macro pressure and market structure factors

The crypto market experienced a significant shock following the PCE data release. As of June 26, 2026, Bitcoin fell below the key psychological threshold of $60k, hitting a low of $58,000. According to Gate market data, Bitcoin dipped to $58,106.9 during the day before rebounding to around $59,800, but still failed to reclaim the $60,000 level. Ethereum recovered from a low of $1,532.77 to around $1,565, with limited overall rebound momentum.

Market panic intensified sharply. The Fear and Greed Index fell to 13, in the "extreme fear" zone. Across the network, 24-hour liquidations reached $60k, with over 200k people liquidated, and long liquidations accounting for $1.16 billion.

Bitcoin's decline is the result of a combination of macro pressure and market structure factors. On the macro level, the PCE data reinforced expectations that the Fed will maintain tightening, with a stronger dollar and rising Treasury yields jointly suppressing all risk assets, including Bitcoin. On the market structure level, nearly $10 billion worth of Bitcoin options expired on June 26, exacerbating market volatility and directional pressure. Additionally, U.S. spot Bitcoin ETFs saw $469 million in outflows, further weakening market demand.

In terms of relative performance, Ethereum fell more than Bitcoin, consistent with the classic defensive pattern where capital concentrates into more liquid and higher market-cap assets when risk appetite contracts.

What structural pressures does the crypto market face in a macro tightening cycle?

The current pressure on the crypto market is not a short-term phenomenon but the result of multiple structural factors overlapping.

The first layer of pressure comes from liquidity contraction. The expectation of Fed rate hikes means global dollar liquidity will continue to tighten, and as high-beta risk assets, crypto assets are far more sensitive to liquidity changes than traditional assets. When funding costs rise and risk appetite declines, crypto assets are often the first to be reduced in allocations.

The second layer of pressure comes from competition from alternative assets. The 10-year Treasury yield rising to 4.42% means that "risk-free returns" have become substantively attractive. For institutional investors, holding Treasuries can yield nearly 4.5% annualized returns with virtually no risk—this significantly raises the opportunity cost of holding crypto assets as an investment target.

The third layer of pressure comes from a negative feedback loop in market sentiment. After Bitcoin fell below the key psychological threshold of $60,000, it triggered large-scale long liquidations, further exacerbating downward price pressure. The panic from liquidations in turn suppressed new buying, creating a self-reinforcing downward spiral.

However, some potential buffer factors should also be noted. The preliminary peace agreement between the U.S. and Iran signed in mid-June and the reopening of the Strait of Hormuz have already brought oil prices back to pre-conflict levels. If inflation data for June and July confirms that recent price increases were mainly driven by temporary energy shocks, the market's extreme expectations for rate hikes may be revised. But until new data confirms this trend, the macro environment remains a headwind for the crypto market.

Summary

The May PCE data sends a clear signal: the downward trajectory of U.S. inflation is encountering resistance. Overall PCE year-over-year rose to 4.1%, a three-year high, and core PCE year-over-year at 3.4% is the highest since October 2023. Although the data met expectations, the direction of "meeting expectations" was upward inflation rather than a decline, which was enough to push the market's probability pricing for a September Fed rate hike above 85%.

At the asset price level, the transmission chain is clear: inflation stickiness → heightened rate hike expectations → rising Treasury yields → stronger dollar → risk asset valuation pressure. The Nasdaq fell for four consecutive days, the Magnificent Seven tech stocks all declined, and Apple dropped 6% due to surging storage costs. The crypto market was not spared either, with Bitcoin falling below $60,000 and market sentiment plunging into extreme fear territory.

The market is currently in a critical game between macro data and policy expectations. The PCE data confirmed the stubbornness of inflation, but the retreat in oil prices leaves room for uncertainty about the future inflation trajectory. For the crypto market, inflation reports in the coming months will determine the market direction—if a downward trend in inflation is confirmed, risk appetite may recover; if inflation remains high, tightening policy pressure will continue to suppress all risk assets.

FAQ

Q1: What exactly was the May PCE data? Why did the market react so strongly?

The May overall PCE rose 4.1% year-over-year, the highest since April 2023; core PCE rose 3.4% year-over-year, the highest since October 2023. Although the data met expectations, it confirmed that inflation is still rising rather than falling, and the market's probability expectation for a September rate hike immediately jumped to 85%.

Q2: What is the relationship between Apple's 6% stock drop and the inflation data?

Apple's sharp drop was directly caused by surging storage chip costs—AI demand pushed up upstream prices, forcing Apple to raise Mac and iPad prices. More deeply, the inflationary environment confirmed by the PCE data means consumer electronics companies can no longer absorb cost increases internally and have to pass them on to consumers, raising dual concerns about profit margins and sales volumes.

Q3: What is the core driving factor behind Bitcoin falling below $60,000?

Bitcoin's decline is the result of combined macro pressure and market structure factors. On the macro level, the PCE data reinforced expectations that the Fed will maintain tightening, with a stronger dollar suppressing risk assets. On the market structure level, the expiration of approximately $10 billion in Bitcoin options increased volatility, while spot ETFs saw $469 million in outflows.

Q4: What does the PCE data mean for the future direction of the crypto market?

If inflation data for June and July confirms that current inflation is mainly driven by temporary energy shocks, the market's extreme expectations for rate hikes may be revised, and risk assets could see a breather. However, if inflation remains high, tightening policy will continue to suppress the crypto market.

Q5: What is the linkage between tech stock sell-offs and crypto market declines?

Both share the same macro drivers—inflation stickiness pushes up rate hike expectations, which in turn suppresses valuations of all risk assets. As high-beta assets, crypto assets typically react more sharply to liquidity tightening and declining risk appetite.