U.S. Stocks Mostly Higher As Inflation Data Adds To Interest Rate Optimism

Stocks have moved mostly higher during trading on Friday, with the major averages all moving to the upside after turning in a mixed performance on Thursday. The Nasdaq and the S&P 500 are rebounding after ending the previous session at their lowest closing levels in over a month.

Currently, the major averages are off their highs of the session but still firmly positive. The Dow is up 605.29 points or 1.5 percent at 40,540.36, the Nasdaq is up 125.02 points or 0.7 percent at 17,306.74 and the S&P 500 is up 50.99 points or 0.9 percent at 5,450.21.

The strength on Wall Street comes as the release of closely watched inflation data by the Commerce Department has added to confidence about an interest rate by the Federal Reserve in September.

The Commerce Department said its personal consumption expenditures (PCE) price index inched up by 0.1 percent in June after coming in unchanged in May. The uptick by the index matched expectations.

The report also said the annual rate of growth by the PCE price index slowed to 2.5 percent in June from 2.6 percent in May. The slowdown in year-over-year growth also met estimates.

Meanwhile, the Commerce Department said the core PCE price index, which excludes food and energy prices, rose by 0.2 percent in June after inching up by 0.1 percent in May. Economists had expected another 0.1 percent uptick.

The annual rate of growth by the core PCE price index was unchanged from the previous month at 2.6 percent in June, while economists had expected the pace of growth to slow to 2.5 percent.

“The subdued rise in prices will give the Federal Reserve greater confidence that inflation is on track to moderate toward its 2% target,” said Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics.

He added, “While we are not expecting the news to be quite as good in coming months, we think it would take a nasty upward surprise to inflation between now and September to derail the Fed from cutting rates at that meeting.”

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending.

The report showed personal income rose by less than expected, while personal spending increased in line with economist estimates.

The University of Michigan also released revised data showing consumer sentiment in the U.S. deteriorated by slightly less than previously estimated in the month of July.

The report said the consumer sentiment index for July was upwardly revised to 66.4 from the preliminary reading of 66.0. Economists had expected the reading to be unrevised.

Despite the upward revision, the consumer sentiment index for July is still down from 68.2 in June and marks the lowest reading since November 2023.

Sector News

Housing stocks are turning in some of the market’s best performances on the day, with the Philadelphia Housing Sector Index surging by 3.1 percent to a record intraday high.

Significant strength is also visible among telecom stocks, as reflected by the 1.4 percent gain being posted by the NYSE Arca North American Telecom Index. The has reached its best intraday level in over five months.

Networking, gold and transportation stocks are also seeing considerable strength, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan’s Nikkei 225 Index fell by 0.5 percent, while China’s Shanghai Composite Index inched up by 0.1 percent.

Meanwhile, the major European markets have all moved to the upside on the day. While the German DAX Index has climbed by 0.5 percent, the U.K.’s FTSE 100 Index is up by 1.1 percent and the French CAC 40 Index is up by 1.2 percent.

In the bond market, treasuries have moved higher amid a positive reaction to the inflation data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.5 basis points at 4.199 percent.

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