Stocks climbed on Wall Street Friday following the release of a promising inflation report that confirmed price increases are cooling. The S&P 500 rose by 0.5%, the Nasdaq added 0.7%, and the Dow Jones Industrial Average gained 160 points, or 0.4%, building on the momentum of the previous day’s record-setting high. As inflation continues to moderate, investor sentiment is buoyed by the prospect of the Federal Reserve cutting interest rates at its upcoming meeting.
Inflation Report Confirms Cooling Prices
The much-anticipated inflation report, a key indicator closely monitored by the Federal Reserve, provided evidence that inflation pressures are easing. The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure of inflation, edged up by just 0.1% in July, bringing the year-over-year rate to 2.6%. This is only slightly above the Fed’s 2% target and down significantly from the 7.1% peak in mid-2022.
The report has fueled optimism that the Fed will soon pivot from its aggressive monetary tightening stance. Traders are now increasingly betting that the central bank will cut its benchmark interest rate as early as September. Market expectations are that the Fed will reduce rates by a full percentage point by the end of the year, a move that would lower borrowing costs across the economy and potentially stimulate further growth.
Chipmakers Lead the Rally
The positive inflation report also gave a boost to chipmakers, which saw broad gains on Friday. Marvell Technology (NASDAQ:MRVL) surged 7.3% after posting quarterly results that met Wall Street’s sales and profit expectations. The company’s strong performance reflects the ongoing demand for chips, particularly in sectors like artificial intelligence and data centers.
Dell Technologies (NYSE:DELL) also reported better-than-expected earnings, driven by record revenue from its server and networking division. The company’s stock rose 4.4% in premarket trading, as it continues to benefit from businesses investing in AI infrastructure.
Mixed Results for Retailers
Not all sectors shared in the market’s gains. Ulta Beauty (NASDAQ:ULTA), a mall-based cosmetics retailer, saw its shares tumble 8.7% after reporting sales and profits that fell short of expectations. Despite its recent challenges, Ulta remains a significant player in the beauty industry, though it lowered its guidance for the remainder of the year.
Warren Buffett’s Berkshire Hathaway (NYSE:BRK.B), which recently revealed a stake in Ulta, may need to reassess its position as the company navigates a challenging retail environment.
Global Markets React to U.S. Inflation Data
Global markets responded positively to the U.S. inflation data, with European indices showing modest gains. France’s CAC 40 advanced 0.3%, Germany’s DAX ticked up by 0.2%, and Britain’s FTSE 100 rose 0.3%. These movements reflect a broader optimism that the Fed’s potential rate cuts could support global economic growth.
In Asia, Japan’s Nikkei 225 added 0.7%, closing at 38,647.75. The rise was partly due to industrial production data, which showed a 2.8% increase in July, rebounding from a 4.2% decline in June. However, Tokyo’s consumer prices rose more than expected, increasing by 2.6% year-over-year in August. This uptick in inflation is likely to draw attention from the Bank of Japan, which may consider raising interest rates later this year or early next year.
Energy and Currency Markets
In energy trading, oil prices saw slight declines. Benchmark U.S. crude dropped 17 cents to $75.74 per barrel, while Brent crude, the international standard, fell by 9 cents to $78.73 per barrel. These modest declines reflect a balancing act between supply concerns and the potential for slower economic growth.
On the currency front, the U.S. dollar strengthened slightly against the Japanese yen, rising to 145.37 yen from 145.02 yen. The euro also saw a slight increase, trading at $1.1084, up from $1.1082.
Conclusion: Fed Rate Cuts on the Horizon?
The latest inflation report has reinforced the narrative that price pressures are easing, setting the stage for potential Federal Reserve rate cuts. As Wall Street continues to respond positively, particularly in sectors like technology and chipmaking, investors are increasingly optimistic about the market’s direction. The upcoming Fed meeting will be closely watched as traders and analysts alike anticipate the central bank’s next move.
Featured Image- Megapixl @ Nazariykarkhut
