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US stocks rose Friday as traders took in new inflation data from the Fed’s preferred price gauge.
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PCE inflation cooled to 2.6% last month, the lowest pace of price growth in three years.
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Investors are feeling bullish about rate cuts by the end of the year, the CME FedWatch tool shows.
US stocks jumped on Friday as traders took in fresh inflation data, which showed price pressures continuing to cool off in May.
Major indexes ticked higher, while bond yields slipped. The 10-year Treasury yield dipped two basis points to 4.265%.
The personal consumption expenditures price index, the Federal Reserve’s preferred measure of inflation, eased to 2.6% in May, its lowest reading in three years. The figure was in line with what economists expected and slightly lower than the 2.7% growth recorded last month, fueling investor optimism for rate cuts.
“The lack of surprise in today’s PCE number is a relief and will be welcomed by the Fed,” Seema Shah, the chief global strategist at Principal Asset Management, said in a statement. “However, the policy path is not yet certain. A further deceleration in inflation, ideally coupled with additional evidence of labour market softening, will be necessary to pave the way for a first rate cut in September.”
Investors expect the Fed to hold interest rates steady at the July policy meeting but are bullish on rate cuts by the end of 2024. Markets see a 66% chance the Fed will cut rates twice by December, according to the CME FedWatch tool.
The stock market is on track to close out a strong first half of the year, with the S&P 500 up 15% year-to-date and the Nasdaq up nearly 20%. Still, some concerns about the breadth of the rally have formed, especially in recent days as tech stalwarts like Nvidia have wavered.
The chip firm’s volatile few weeks, which saw $430 billion in market cap erased in a few days before the stock recovered, have sowed some doubt about the prospects of the AI-fueled rally continuing in the second half of 2024.
Here’s where US indexes 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 oil ticked higher 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 jumped 0.5% to $2,348 per ounce.
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The 10-year Treasury yield slipped two basis points to 4.265%.
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Bitcoin dipped 0.5% to $61,388.72.
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