After an initial upward movement, stocks have continued to rise throughout the trading day on Friday. The major indices have all posted significant gains following the mixed performance in the prior session.
Currently, the major indices are trading near their peak levels of the day. The Dow Jones Industrial Average is up 788.73 points or 2.0 percent, reaching 40,723.80. The Nasdaq Composite has risen 254.50 points or 1.5 percent to 17,436.22, and the S&P 500 has increased by 84.41 points or 1.6 percent to 5,483.33.
The rally in the stock market can be attributed to the release of key inflation data by the Commerce Department, strengthening the confidence that the Federal Reserve will consider an interest rate cut in September.
According to the Commerce Department, the personal consumption expenditures (PCE) price index edged up by 0.1 percent in June, following no change in May. This increase was in line with expectations.
The report also indicated that the annual growth rate of the PCE price index slowed to 2.5 percent in June from 2.6 percent in May, meeting market forecasts.
Meanwhile, the core PCE price index, which excludes food and energy, rose by 0.2 percent in June, following a 0.1 percent increase in May. Economists had anticipated a smaller uptick of 0.1 percent again.
The annual growth rate for the core PCE price index remained steady at 2.6 percent in June, contrary to economists' expectations of a slowdown to 2.5 percent.
"The moderate rise in prices will provide the Federal Reserve with greater assurance that inflation is on track to move toward its 2% target," said Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics. He added, "We are not expecting similarly favorable data in the coming months; however, it would take a significant upward surprise in inflation to prevent the Fed from lowering rates in their September meeting."
These inflation metrics, which are favored by the Federal Reserve, were part of the Commerce Department's report on personal income and spending. The report showed slower than expected personal income growth, while personal spending met economist estimates.
Additionally, the University of Michigan released revised data indicating that U.S. consumer sentiment in July deteriorated less than initially estimated. The consumer sentiment index for July was revised up to 66.4 from the preliminary reading of 66.0, though analysts had expected no change. Despite the revision, the index is still lower than June's reading of 68.2 and marks the lowest level since November 2023.
**Sector Performance**
Housing stocks have outperformed, with the Philadelphia Housing Sector Index soaring by 3.4 percent to a record intraday high. Semiconductor stocks have also shown substantial strength, evidenced by a 2.8 percent surge in the Philadelphia Semiconductor Index, recovering from its lowest close in over two months.
Networking stocks have made notable gains, driving the NYSE Arca Networking Index up by 2.2 percent. Telecom stocks have similarly advanced, with the NYSE Arca North American Telecom Index increasing by 1.4 percent, reaching its highest intraday level in more than five months.
Transportation, software, and general telecom stocks are also performing well, contributing to the positive trend across major sectors.
**Other Markets**
In overseas markets, the Asia-Pacific region experienced mixed performance on Friday. Japan's Nikkei 225 Index fell by 0.5 percent, whereas China's Shanghai Composite Index inched up by 0.1 percent.
European markets have all moved higher on the day. Germany's DAX Index climbed by 0.7 percent, while both the U.K.'s FTSE 100 Index and France's CAC 40 Index jumped by 1.2 percent.
In the bond market, treasuries have gained amid a positive reaction to the inflation data. Consequently, the yield on the benchmark ten-year note, which moves inversely to its price, has fallen by 4.8 basis points to 4.207 percent.
