Following a mixed performance in the previous session, stocks surged higher on Friday. All major averages made significant gains, with the Nasdaq and the S&P 500 rebounding from their lowest closing levels in over a month.
While the major averages ended off their session highs, they still closed strong in positive territory. The Dow Jones Industrial Average soared by 654.27 points, or 1.6%, to 40,589.34. The Nasdaq Composite increased by 176.16 points, or 1.0%, to 17,357.88, and the S&P 500 climbed by 59.88 points, or 1.1%, to 5,459.10.
Over the week, the Dow advanced by 0.8%, but the S&P 500 declined by 0.8%, and the Nasdaq dropped by 2.1%.
The strength on Wall Street came as closely watched inflation data from the Commerce Department boosted confidence about a potential interest rate cut by the Federal Reserve in September.
The Commerce Department reported its personal consumption expenditures (PCE) price index edged up by 0.1% in June, following a stagnant reading in May. This increase was in line with expectations.
The report also noted that the annual growth rate of the PCE price index slowed to 2.5% in June from 2.6% in May, meeting market forecasts.
Additionally, the core PCE price index, which excludes food and energy costs, rose by 0.2% in June after a slight 0.1% increase in May. Economists had predicted a similar 0.1% uptick.
The annual growth rate of the core PCE price index remained steady at 2.6% in June, contrary to expectations of a slowdown to 2.5%.
"The subtle rise in prices will increase the Federal Reserve's confidence that inflation is on track to moderate towards its 2% target," commented Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics. He added, "While the news may not be as favorable in the coming months, it would take a significant inflation surprise to prevent the Fed from cutting rates in September."
The inflation readings, favored by the Federal Reserve, were part of the Commerce Department's report on personal income and spending. The report indicated that personal income rose less than anticipated, while personal spending aligned with economists' expectations.
Additionally, the University of Michigan released revised data showing U.S. consumer sentiment for July deteriorated slightly less than initially estimated. The consumer sentiment index for July was revised upward to 66.4 from a preliminary reading of 66.0, though economists had expected no change. Despite this revision, the index is down from 68.2 in June, marking the lowest reading since November 2023.
**Sector News**
Housing stocks were among the day's top performers, with the Philadelphia Housing Sector Index rising by 3.2% to a record closing high. Telecom stocks also demonstrated considerable strength, as evidenced by the 2.6% jump in the NYSE Arca North American Telecom Index.
Semiconductor and networking stocks saw significant gains, boosting the tech-heavy Nasdaq. Other sectors, including commercial real estate, transportation, and steel, also experienced notable increases amid broad-based strength on Wall Street.
**Other Markets**
Overseas, Asia-Pacific markets had a mixed performance on Friday. Japan's Nikkei 225 Index dropped by 0.5%, while China's Shanghai Composite Index inched up by 0.1%.
In Europe, the major markets all advanced. Germany's DAX Index rose by 0.7%, and both the U.K.'s FTSE 100 Index and France's CAC 40 Index increased by 1.2%.
In the bond market, treasuries saw gains in response to the inflation data, with the yield on the benchmark ten-year note falling by 5.6 basis points to 4.200%.
**Looking Ahead**
Next week's trading is expected to be influenced by the Federal Reserve's monetary policy announcement. While the Fed is likely to leave interest rates unchanged, the accompanying statement could affect rate outlooks. Additionally, earnings reports from several high-profile companies are anticipated to draw attention.
