United States equities climbed to record highs on Friday as cooler-than-expected inflation data reinforced optimism that the Federal Reserve will maintain its rate-cutting trajectory, bolstering confidence in the economic outlook and justifying higher stock valuations.
The September consumer price index (CPI), released later than usual due to the U.S. government shutdown, rose 0.3% for the month and 3% annually, the Bureau of Labor Statistics reported.
Both readings came in below the 0.4% monthly and 3.1% annual increases expected.
Excluding food and energy, core CPI advanced 0.2% on the month and 3% from a year earlier, also lighter than expectations.
The softer inflation figures, alongside stronger corporate earnings, propelled all three major U.S. indexes to all-time closing highs.
The Dow Jones Industrial Average gained 472.5 points or 1%, to close at 47,207.1. The S&P 500 advanced 53.3 points or 0.8% to 6,791.7, while the Nasdaq Composite climbed 263.1 points or 1.2% to 23,204.9.
The S&P 500 and Nasdaq notched their largest weekly percentage gains since August, while the Dow Jones Industrial Average posted its strongest weekly advance since June.
The CPI data eased fears that tariffs were driving inflation higher, all but cementing expectations for a 25-basis-point rate cut at the Fed’s upcoming policy meeting, with the CME Group FedWatch Tool indicating a 96.7% chance of such a cut.
The report also provided a rare dose of official data amid the ongoing government shutdown that has stalled most economic releases.
According to FactSet, with about 29% of S&P 500 companies having reported third-quarter results, 87% have delivered earnings-per-share surprises, and 83% have exceeded revenue forecasts, both well above historical averages.
Investors now turn their attention to next week’s key earnings from technology heavyweights Meta Platforms, Microsoft, Alphabet, Amazon.com, and Apple — five of the “Magnificent Seven” stocks that have driven much of this year’s market rally.
Industrial names Caterpillar and Boeing are also due to report.
In stock-specific moves, Alphabet gained 2.7% after Anthropic expanded its partnership with Google to use up to one million of its artificial intelligence chips to train its Claude chatbot.
Ford Motor surged 12.2% after beating third-quarter profit forecasts, while defence contractor General Dynamics rose 2.7% on stronger-than-expected results.
By contrast, Deckers Outdoor tumbled 15.2% after issuing a full-year sales forecast below market expectations, and Alaska Air slid 6.1% after trimming its annual outlook.
On the bond markets, 10-year rates were flat at 4.003%, while 2-year rates eased 0.2% to 3.484%.
