- U.S. stocks rose on Friday as traders digested new inflation data from the Federal Reserve’s preferred price gauge.
- PCE inflation fell to 2.6% last month, the lowest level in three years.
- Investors are becoming bullish on interest rate cuts by the end of the year, according to the CME FedWatch tool.
U.S. stocks surged on Friday as traders digested the latest inflation data that showed price pressures continued to ease in May.
Major stock indexes rose but bond yields fell. The yield on the 10-year Treasury note fell 2 basis points to 4.265%.
The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index, fell to 2.6% in May, the lowest in three years. The reading was in line with economists’ expectations and slightly lower than last month’s 2.7% increase, bolstering investor optimism for a rate cut.
“It is a relief that today’s PCE number was not a surprise and will be welcomed by the Fed,” Seema Shah, chief global strategist at Principal Asset Management, said in a statement. “However, the policy direction is still uncertain. A further slowdown in inflation, and ideally further evidence of a softening labor market, will be needed to pave the way for a first rate cut in September.”
Investors expect the Fed to keep rates on hold at its July policy meeting, but are bullish on a cut before the end of 2024. According to CME’s FedWatch tool, the market sees a 66% chance of the Fed cutting rates twice by December.
The stock market is on track to finish the first half of the year on a high, with the S&P 500 up 15% so far this year and the Nasdaq up nearly 20%, but some concerns are growing about the scope of the gains, especially after tech giants like Nvidia have been in disarray in recent days.
Semiconductor stocks have been volatile for weeks, wiping out $430 billion in market capitalization in just a few days before recovering, raising doubts about whether the AI-driven stock rally will continue into the second half of 2024.
Below are U.S. stock indexes as of the start of trading at 9:30 a.m. on Friday.
Commodities, Bonds and Cryptocurrencies:
- West Texas Intermediate crude rose 0.2% to $81.85 a barrel, while the international benchmark Brent crude rose 0.2% to $85.57 a barrel.
- Gold rose 0.5% to $2,348 an ounce.
- The yield on the 10-year Treasury note fell 2 basis points to 4.265%.
- Bitcoin fell 0.5%.61,388.72.
