United States benchmark averages finished higher on Friday, extending the recent rally and nudging the S&P 500 closer to a fresh all-time high, as investors welcomed softer inflation data that may give the Federal Reserve added confidence to lower interest rates at its upcoming meeting.
The Dow Jones Industrial Average rose 104.1 points, or 0.2%, to close at 47,955.0. The S&P 500 gained 13.3 points, also up 0.2%, to finish at 6,870.4, placing the benchmark less than 1% below its intraday record. The Nasdaq Composite advanced 73.0 points, or 0.3%, to end the day at 23,578.1.
Friday brought a fresh round of economic data for markets to absorb. The Commerce Department reported that core personal consumption expenditures, the Fed’s preferred inflation gauge, rose at an annual rate of 2.8% in September.
That reading, delayed because of the prolonged government shutdown, came in slightly below the 2.9% expected.
On a monthly basis, core PCE increased 0.2%, in line with forecasts. Both monthly and annual headline PCE figures also met expectations.
Separately, the University of Michigan’s consumer sentiment index came in stronger than anticipated for December, offering a more upbeat snapshot of household confidence and inflation expectations.
With Friday’s PCE release representing the final inflation reading before the Fed’s interest rate decision, the data reinforced market expectations that policymakers may now opt for a quarter-point cut.
Recent labour market indicators have softened, intensifying the focus on employment conditions as inflation moves closer to target.
Pricing in a rate cut has firmed considerably. Traders now see an 86.2% probability of a reduction next Wednesday, a sharp rise from sentiment just weeks earlier, according to the CME Group FedWatch Tool.
The federal funds target range remains at 3.75% - 4%, with rates trading near the upper end as short-term funding pressures persist.
Major indices posted weekly gains as well. The S&P 500 finished the week up 0.3%, while the Nasdaq climbed nearly 1% and the Dow added around 0.5%.
In corporate news, Netflix shares swung throughout the session after the company confirmed a US$72 billion deal with Warner Bros. Discovery to acquire its film and streaming assets.
The transaction, expected to be completed within 12 to 18 months, initially triggered heavy selling in Netflix stock before it recovered some ground, ending nearly 3% lower. Warner Bros. Discovery shares, by contrast, surged more than 6%.
On the bond markets, yields moved higher. The 10-year Treasury rose 1% to 4.139%, while the 2-year increased 1.1% to 3.564%.
