The S&P 500 rose 0.8% and was on track to surpass the all-time high reached earlier this month. The Dow Jones Industrial Average added 267 points, or 0.6%, also heading toward its own record, while the Nasdaq composite rose 1%, as of 9:35 a.m. Eastern Time.
The inflation data is encouraging because it could mean less pain for lower- and middle-income households struggling with still-high price increases every month. More importantly for Wall Street, this could also pave the way for the Federal Reserve to continue cutting interest rates in hopes of providing a boost to the slowing labor market.
The Fed last month cut its key interest rate for the first time this year, but has been reluctant to promise more relief because lower rates could worsen inflation in addition to roiling the economy and investment prices.
Treasury yields fell in the bond market as traders increased their bets to a near certainty that the Fed will cut rates at its next two meetings, including one next week.
“Right now, Fed officials are more concerned about the labor market than inflation,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Without any evidence to the contrary, there is nothing that can really change their views on cuts.” Stock markets have been shaky in recent weeks following a massive 35% rally for the S&P 500 from its April lows. Criticism has increased that shares have become too expensive after their prices rose so much faster than corporate profits. Concerns also flared about possible bad loans remaining on banks’ balance sheets after a long period of calm that may have encouraged risk-taking. And President Donald Trump roiled markets after threatening much higher tariffs on China, the world’s second-largest economy. But stock prices have bounced back each time, only to continue rising again. Several banks have provided encouraging updates on their balance sheets, while Trump will meet Chinese leader Xi Jinping at a conference next week.
And most major U.S. companies reported stronger last-quarter earnings than analysts expected, as is usually the case.
Intel rose 5.3% on Friday after reporting last-quarter earnings that beat analyst expectations. CEO Lip-Bu Tan attributed the boom in artificial intelligence to “accelerating demand for computers and creating attractive opportunities.”
Ford Motor rose 7.7% after the automaker also beat analysts’ profit expectations in the last quarter. The company said its business is at the high end of the forecast range it gave for financial performance this year in February.
Procter & Gamble’s profit also exceeded analyst expectations, despite what CEO Jon Moeller called “a challenging consumer and geopolitical environment.” Shares of the company behind the Charmin, Oral-B and Pampers brands rose 2.1%.
They helped offset a decline in Newmont Mining, which fell 7.1% even as it also reported stronger-than-expected profits. The gold miner’s shares started the day with a stunning gain of almost 139%, thanks to the momentum of the rising gold price.
But gold’s superstar run has stalled recently, and a slide on Friday left it on track for a third decline in the past four days after setting its latest record.
Many of the same factors that drew buyers to gold this year are still there, including concerns about the mountain of debt the US and other governments around the world are accumulating. The US government’s gross national debt topped $38 trillion this week, and the concern is that continued acceleration will only worsen inflation.
But no investment’s price stays up forever, and criticism grew that the price of gold had risen too far, too fast, after rising even more than the US stock market. The price of gold is still up over 50% so far this year.
On the foreign stock markets, indexes rose, especially in Europe and Asia. South Korea’s Kospi rose 2.5%, and Japan’s Nikkei 225 rose 1.4% for two of the world’s biggest moves.
On the bond market, the yield on ten-year government bonds fell from 4.01% at the end of Thursday to 3.99%.
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