U.S. stocks rose broadly on Friday after an in-line inflation report strengthened hopes for interest rate cuts in September, though Nike shares slumped after a dismal annual sales forecast.
The Commerce Department’s data showed personal consumption expenditures (PCE) price index – the Fed’s preferred inflation gauge – was unchanged on a monthly basis in May and rose 2.6% annually, all along expectations.
Excluding the volatile food and energy components, the core figure increased 0.1% month-on-month and 2.6% annually.
Chances of a rate cut in September inched up to 68% from 61% before the data, as per LSEG FedWatch data.
“This is a perfect report – it gives the Fed the green light to cut in September, and sets the stage for the dovish rhetoric to continue,” said Jay Woods, chief global strategist at Freedom Capital Markets.
Traders held their bets of two cuts despite Fed projections of just one this year, hoping for a sustained downtrend in inflation and as the economy remains susceptible to decades-high interest rate.
Megacaps including Apple <AAPL.O>, Nvidia (NVDA.O), opens new tab, and Amazon.com (AMZN.O), opens new tab rose between 0.2% and 1.2%.
Most of the S&P 500 subsectors were higher, led by tech stocks (.SPLRCT), opens new tab. The small-cap Russell 2000 (.RUT), opens new tab rose 0.8% to an over two week-high manager research analyst at Morningstar.
However, Nike (NKE.N), opens new tab slumped 17.1% after forecasting a surprise drop in fiscal 2025 revenue, weighing on the broader consumer discretionary sector (.SPLRCD), opens new tab.
At 9:43 a.m. ET, the Dow Jones Industrial Average (.DJI), opens new tab was up 133.28 points, or 0.34%, at 39,297.34, the S&P 500 (.SPX), opens new tab was up 16.64 points, or 0.30%, at 5,499.51, and the Nasdaq Composite (.IXIC), opens new tab was up 42.09 points, or 0.24%, at 17,900.77.
Richmond Fed President Thomas Barkin said he still wanted to proceed “deliberately” on policy and the Fed’s Mary Daly said the latest data was “good news that policy is working.”
Comments from Fed official Michelle Bowman is also expected during the day.
Investors also geared up for the final reconstitution of the Russell benchmark indexes during the day, with the furious rally in AI-related stocks expected to leave an outsized imprint on their final shape.
Both the S&P 500 and the Nasdaq were set for gains in a week marked by a short-lived rout in AI-related stocks, Amazon.com hitting $2 trillion market value for the first time, quarterly earnings from the likes of FedEx (FDX.N), opens new tab and Micron Technology (MU.O), opens new tab, and a mixed bag of economic data.
The two indexes were set for quarterly gains. However the blue-chip Dow (.DJI), opens new tab was on pace to end the quarter down 1%, highlighting the divergence between the more tech-heavy indexes and the rest of the market.
Trump Media & Technology Group (DJT.O), opens new tab gained 4% after a shaky performance from Democratic incumbent Joe Biden in the first presidential debate.
Optical networking gear maker Infinera (INFN.O), opens new tab jumped 18.4% after Nokia (NOKIA.HE), opens new tab said it would acquire the company in a $2.3 billion deal.
Advancing issues outnumbered decliners by a 4.16-to-1 ratio on the NYSE. Advancing issues outnumbered decliners by a 2.18-to-1 ratio on the Nasdaq.
The S&P index recorded 12 new 52-week highs and one new low, while the Nasdaq recorded 35 new highs and 38 new lows.