29-7-2023 (NEW YORK) U.S. stocks closed higher on Friday as fresh inflation data indicated that inflationary pressures continued to ease. The Dow Jones Industrial Average gained 0.50 percent, or 176.57 points, to close at 35,459.29. The S&P 500 rose 0.99 percent, or 44.82 points, to close at 4,582.23, while the Nasdaq Composite Index increased 1.90 percent, or 266.55 points, to close at 14,316.66.
Nine of the 11 primary S&P 500 sectors ended the day in the green, with communication services and consumer discretionary leading the gainers by rising 2.30 percent and 1.85 percent, respectively. Utilities and real estate were the only sectors to end in the red, losing 0.26 percent and 0.25 percent, respectively.
Investor sentiment was boosted by a new inflation report showing continued cooling in price pressures, leading to increased confidence in a soft landing for the U.S. economy. According to Commerce Department data released on Friday, the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred gauge of inflation, increased 3 percent in June from a year ago. This was a slowdown from 3.8 percent in May, marking the smallest annual gain since March 2021.
On a monthly basis, the PCE price index rose a mild 0.2 percent in June after a 0.1 percent increase in May, in line with market expectations. The report also showed that the so-called core PCE price index, which excludes volatile energy and food prices, rose 0.2 percent in June from the prior month and was up 4.1 percent from a year ago. The annual rate of the core PCE in June was the lowest since September 2021.
Gina Bolvin, president of Bolvin Wealth Management Group, said in an interview with CNBC, “In the wake of stronger-than-expected GDP and a better-than-expected earnings season, this (new PCE data) could be the catalyst to send the market to new highs.”
Craig Erlam, senior market analyst at OANDA, said, “With inflation steadily cooling, the Fed’s historic tightening campaign appears to be ending. The focus on Wall Street won’t just be inflation but now also economic activity.”
Investors also analyzed corporate earnings results at the midpoint of the earnings season. According to FactSet data, with second-quarter results reported from almost half of the companies in the S&P 500, 80 percent have exceeded analysts’ earnings expectations.
Erik Ristuben, chief investment strategist at Russell Investments, said in an interview with The Wall Street Journal, “The fact that earnings are actually turning out not to be as bad as feared is also supporting the market.”
Shares of big tech companies powered the indexes higher again on Friday. Intel shares rose 6.60 percent as investors cheered a return to profitability, while Meta Platforms and Google parent Alphabet both gained on Friday and advanced more than 10 percent this week. Tesla and other electric vehicle shares also finished higher.
