The Dow jumped more than 400 points Friday to an all-time high after a benign inflation report cleared the way for the Federal Reserve to focus on shoring up the labor market while continuing its interest rate easing.
In recent trading, the Dow Jones Industrial Average was up 442 points, or 1%, at 42,617. The blue-chip index hit an all-time high of 42,628.32
The S&P 500, which closed at record on Thursday, edged up 0.1%, while the Nasdaq slipped 0.2%. The three major indexes are on track for their third straight week of gains.
A Commerce Department’s report showed that consumer spending increased moderately in August, suggesting the economy retained some of its solid momentum in the third quarter, while inflation pressures continued to abate.
“It’s a relief to have (inflation) move in the right direction and hopefully it continues going in that direction,” said Joe Saluzzi, co-head of equity trading at Themis Trading.
“It really doesn’t matter whether it’s 50 bps or 25 bps. What matters is, will they continue cutting rates over the next year?”
Odds that the central bank will cut rates by 50 basis points at its November meeting stood at about 52.1%, compared with 50% seen before the data. Those for a 25 bps reduction stand at about 47.9%, as per the CME Group’s FedWatch Tool.
Inflation moderating towards the central bank’s 2% target gave the Fed enough room to commence its policy easing cycle with a 50 basis point rate cut last week. Focus will now shift to a slew of labor market reports due next week.
The Russell 2000 index, which tracks small caps, outperformed with a 0.7% rise.
Tech stocks such as Nvidia and Amazon lost 0.9% and 0.4%, respectively, and weighed on the Nasdaq.
The University of Michigan’s final September estimate on consumer sentiment stood at 70.1, compared with estimates of 69.3, as per economists polled by Reuters.
Remarks from Fed Governor Michelle Bowman later in the day will remain in focus.
Late on Thursday, Fed Governor Lisa Cook said the central bank’s rare move earlier this month could address increased “downside risks” to employment.
Among other stocks, Bristol-Myers Squibb surged 2.3% after the FDA approved its schizophrenia drug.
Costco Wholesale dropped 2.8% after posting downbeat fourth-quarter revenue.
US-listed shares of Chinese firms such as Alibaba rose 3.5%, PDD Holdings climbed 5.8% and NetEase gained 2.8% after China’s central bank lowered interest rates and injected liquidity into the banking system, in its latest stimulus move.
Miners such as Arcadium added 4.2% and US-listed shares of BHP rose 1.5% after a report showed top Chinese cities Shanghai and Shenzhen are planning to lift key remaining restrictions on home purchases to attract potential buyers.
