Nasdaq 100 and S&P 500 Weekly Gains: Inflation Eases, Fed Rate Cuts in Focus

Dow Jones Hits Record as Inflation Data Fuels Optimism

The Dow Jones Industrial Average reached a new record high on Friday, bolstered by data that suggests inflation is continuing to cool. This optimistic development supported gains across Wall Street, with all three major indexes posting advances for the week. The S&P 500 rose by nearly 1%, while the Dow and Nasdaq gained 0.7% and 0.9%, respectively.

Investors were encouraged by the latest personal consumption expenditures (PCE) price index, a key inflation measure favored by the Federal Reserve. In August, PCE rose 0.1%, meeting economist expectations, while the annualized increase came in at 2.2%, slightly below the forecasted 2.3%. The data points to continued progress in managing inflation, which may prompt the Fed to ease its monetary policy further.

At 17:54 GMT, the Dow Jones Industrial Average is trading 42386.24, up 211.13 or +0.50%. The S&P 500 Index is at 5744.48, down 0.89 or -0.02% and the Nasdaq is trading 18142.35, down 47.94 or -0.26%.

Interest Rate Outlook

As inflation cools, the likelihood of rate cuts increases, giving a potential boost to both equity and bond markets. Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, remarked that as long as inflation remains in check, the Fed can shift its focus to the labor market, potentially adopting a “rate-cutting bias.” This could be a positive driver for market performance, especially as the U.S. economy remains robust.

The economic data this week added to the optimism. Initial jobless claims were lower than expected, signaling a strong labor market, and the final reading of second-quarter GDP came in at a solid 3%. Meanwhile, consumer sentiment beat expectations, with the University of Michigan’s index rising to 70.1 in September, up from 67.9 in August, signaling continued confidence in the economy.

Sector Performance

Most sectors showed strength, with the energy and financial sectors standing out. Energy stocks climbed 1.29%, while financials gained 0.45%. Technology stocks, however, saw a notable decline of 1.02%, reflecting investor caution over profit growth challenges.

Stock-Specific Highlights

Several notable companies made headlines. Bristol Myers Squibb surged over 3% after the FDA approved a groundbreaking schizophrenia drug, while Wynn Resorts gained 6% following an upgrade from Morgan Stanley.

On the downside, Novo Nordisk fell nearly 4% after JPMorgan projected lower sales for its weight-loss drug, and HP Inc. dropped 3% following a downgrade by Bank of America.

Market Forecast

Looking ahead, market sentiment appears bullish, supported by solid economic fundamentals and the prospect of a more accommodative Fed. Historically, the S&P 500 has performed well when inflation eases and employment remains strong. If inflation continues to stabilize and rate cuts are realized, both equity and bond markets are likely to benefit, making a positive close to the year more probable.