Stocks surged Friday with positive US inflation data boosting investor confidence in potential rate cuts
Stocks soared on Friday, ending a volatile week on a high note as investors considered fresh US inflation data, according to CNBC.
The Dow Jones Industrial Average surged 654.27 points, or 1.64 percent, closing at 40,589.34. The S&P 500 increased by 1.11 percent to 5,459.10, while the Nasdaq Composite rose 1.03 percent, finishing at 17,357.88.
CFRA Research’s Sam Stovall noted that Friday's gains resulted from oversold sentiment, a robust GDP report on Thursday, and expectations that the Federal Reserve will cut rates due to economic strength.
“Today’s benign PCE report helped talk the market off the ledge,” he said. “With this pullback, the great rotation lives on, and breadth continues to be on our side.”
Investors shifted towards cyclical stocks and small caps, with the Russell 2000 climbing 1.67 percent. Industrials and materials stocks also advanced, boosting their respective S&P sectors by approximately 1.7 percent.
3M led the industrials sector with a 23 percent increase, marking its best performance since at least 1972.
Technology stocks that had struggled earlier in the week rebounded, with Microsoft and Amazon each gaining over 1 percent. Meta Platforms saw a nearly 3 percent increase, contributing to a roughly 1 percent rise in the S&P’s information technology sector.
Wall Street also reviewed June’s personal consumption expenditures (PCE) price index, a key inflation measure for central bank policymakers. The headline PCE rose 0.1 percent monthly and 2.5 percent year-over-year, aligning with economists’ expectations from a Dow Jones poll.
Positive inflation data has fueled investor optimism for additional rate cuts this year, with the fed funds futures market anticipating cuts in September, November, and December.
“The numbers have been coming in tamer,” said Ken Mahoney, president of Mahoney Asset Management. “In housing and real estate, you’re starting to see some cracks. They’re going to stop messing around, start cutting rates.”
This information concluded a tumultuous week on Wall Street. The S&P 500 fell by 0.8 percent, and the Nasdaq dropped 2.1 percent, with both indexes experiencing back-to-back weekly losses for the first time since April.
However, the Dow gained 0.8 percent, achieving its fourth consecutive positive week for the first time since May, driven by a rotation into small caps and cyclical stocks.
