Stocks on Wall Street rallied on Friday as the S&P 500 closed its sixth winning month in the last seven. The Dow Jones Industrial Average jumped nearly 575 points, or 1.5%, while the Nasdaq composite slipped slightly due to sagging prices for some big technology stocks. Gap was one of the biggest gainers in the market, soaring 28.6% after reporting stronger profit and revenue for the latest quarter than analysts expected, and raising its forecasts for sales and profitability for the year. Stocks also got a boost from easing Treasury yields in the bond market after the latest reading on inflation came in as expected, leaving open the question of when lower interest rates may be implemented.
The report showed that inflation remained at 2.7%, exactly as forecasted, with some underlying trends showing improvement. This could bolster confidence at the Federal Reserve that inflation is heading towards its target of 2%, which is necessary for a cut in the main interest rate. The Fed has been keeping interest rates high to stifle high inflation, but if held too high for too long, it could cause a recession. The road to lower inflation will be challenging, with growth slowing faster than inflation, according to Brian Jacobsen, chief economist at Annex Wealth Management. Consumer spending growth weakened more than expected, while incomes for Americans also slowed, indicating a change in consumer behavior.
Following the report, Treasury yields fell, with the 10-year Treasury yield dropping to 4.50% from 4.55% late Thursday. The two-year Treasury yield, which closely tracks Fed action expectations, slipped to 4.87%. While no one expects the Fed to cut interest rates at its next meeting, traders are betting on an 85% probability of a cut by the end of the year. Stocks in industries that benefit from lower interest rates led the market on Friday, with real estate stocks jumping 1.9% as a group. On the losing end were tech stocks like Dell and Nvidia, with Dell tumbling despite meeting profit forecasts, and Nvidia falling after a period of soaring profits. Trump Media & Technology Group slumped following Donald Trump’s conviction on felony charges, while MongoDB dropped despite topping profit and revenue forecasts.
In global markets, indexes were mixed across Asia and Europe. Overall, the S&P 500 rose 42.03 points to 5,277.51, the Dow leaped 574.84 points to 38,686.32, and the Nasdaq slipped to 16,735.02. Stock markets abroad showed mixed results, with fluctuations in indexes in Asia and Europe. The market rally on Wall Street following the inflation report indicates a positive outlook for investors, with expectations of potential interest rate cuts in the future. The performance of various industries and individual stocks highlighted the impact of inflation trends and consumer behavior on the market. Despite uncertainties surrounding the economy, the stock market ended the month on a high note, setting new records and providing opportunities for investors to navigate changing trends with caution and confidence.
