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U.S. stocks rose on Friday as traders digested new inflation data from the Fed’s preferred price indicator.
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PCE inflation cooled to 2.6% last month, the slowest price growth rate in three years.
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Investors are optimistic about rate cuts by the end of the year, according to CME’s FedWatch tool.
U.S. stocks rose on Friday after traders received new inflation data showing price pressures easing further in May.
Major indices were higher, while bond yields fell. The 10-year government bond yield fell two basis points to 4.265%.
The personal consumption expenditures index, the Federal Reserve’s preferred measure of inflation, fell to 2.6% in May, the weakest reading in three years. The reading was in line with economists’ expectations and slightly lower than the 2.7% growth recorded the previous month, fueling investor optimism about rate cuts.
“The lack of surprise in today’s PCE figure is a relief and will be welcomed by the Fed,” Seema Shah, chief global strategist at Principal Asset Management, said in a statement. “However, the policy path is not yet certain. A further slowdown in inflation, ideally coupled with additional evidence of a weakening labor market, will be needed to pave the way for a first rate cut in September.”
Investors expect the Fed to leave interest rates unchanged at its July policy meeting, but are optimistic about rate cuts by the end of 2024. According to the CME FedWatch tool, markets estimate a 66% chance that the Fed will raise rates twice before December will decrease.
The stock market is on track to have a strong first half of the year, with the S&P 500 up 15% this year and the Nasdaq up nearly 20%. Still, some concerns have arisen about the size of the rally, especially in recent days as tech giants like Nvidia wavered.
The chip company’s volatile weeks, which saw $430 billion in market cap wiped out in a matter of days before shares recovered, have cast some doubt on the prospects of the AI-driven rally continuing into the second half of 2024.
Here’s where the US indices stood shortly after the 9:30 a.m. opening bell on Friday:
In commodities, bonds and crypto:
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West Texas Intermediate crude rose 0.2% to $81.85 a barrel. Brent crude, the international benchmark, rose 0.2% to $85.57 a barrel.
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Gold rose 0.5% to $2,348 an ounce.
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The 10-year US Treasury yield fell two basis points to 4.265%.
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Bitcoin fell 0.5% to $61,388.72.
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