1-7-2023 (NEW YORK) The U.S. stock market closed on a positive note as the Federal Reserve’s preferred gauge indicated a slowdown in inflation. The Dow Jones Industrial Average climbed 285.18 points, or 0.84 percent, to settle at 34,407.60, while the S&P 500 gained 53.94 points, or 1.23 percent, ending at 4,450.38. The Nasdaq Composite Index rose by 196.59 points, or 1.45 percent, closing at 13,787.92.
All 11 primary S&P 500 sectors closed in positive territory, with the technology and consumer discretionary sectors leading the gainers at 1.82 percent and 1.37 percent, respectively. The real estate sector experienced the smallest growth of 0.51 percent.
The rally in tech giants continued to gather momentum, with Apple’s market cap exceeding $3 trillion as it grew by 2.3 percent. This surge was driven by signs of cooling inflation and expectations of increased market share for the iPhone maker. U.S. chipmaker Nvidia witnessed a significant jump of 3.6 percent, bringing its yearly gains to around 190 percent. Netflix also gained 2.9 percent, while Amazon, Meta Platforms, and Microsoft rose by 1.9 percent, 1.9 percent, and 1.6 percent, respectively.
Investor concerns regarding inflation were further alleviated by a series of positive economic data released during the week. The latest report on Friday showed that the personal consumption expenditures (PCE) price index, closely monitored by the Fed, rose by 3.8 percent in May on a 12-month basis, marking the slowest increase since April 2021, according to data from the U.S. Bureau of Economic Analysis. On a monthly basis, the PCE price index increased by 0.1 percent in May.
Excluding food and energy, the core PCE price index, which is an important measure of underlying inflation, increased by 0.3 percent in May on a monthly basis. Year over year, the core PCE rose by 4.6 percent, slightly lower than the 4.7 percent reported in April and below estimates, according to the U.S. Bureau of Economic Analysis.
“This is excellent news in the fight against inflation,” said Jamie Cox, managing partner for Harris Financial Group, in an interview with CNBC. “If you don’t believe disinflation is happening, you aren’t paying attention. The Fed was right to pause and needs to hold firm at these levels to prevent overcorrecting and causing an unnecessary recession to fight a beast that is now under control.”
Furthermore, the University of Michigan Surveys of Consumers reported on Friday that the final reading of its consumer sentiment index for June rose to 64.4, up from 59.2 in May, reaching a four-month high.
As the Federal Reserve’s preferred inflation gauge showed signs of cooling last month and consumers curbed their spending due to a slowing economy, the U.S. dollar weakened. The dollar index, which measures the greenback against six major peers, fell by 0.42 percent to 102.9125 in late trading.
In currency markets, the euro strengthened to $1.0911 from $1.0867 in the previous session, while the British pound rose to $1.2693 from $1.2613. The U.S. dollar bought 144.2930 Japanese yen, lower than the 144.8870 yen of the previous session. It also declined against the Swiss franc to 0.8951 francs from 0.8999 francs, and against the Canadian dollar to 1.3239 dollars from 1.3243 dollars. Additionally, the U.S. dollar decreased to 10.7869 Swedish Krona from 10.8615 Swedish Krona.
The U.S. stock market has concluded a robust first half of the year, with the S&P 500 and Nasdaq Composite Index reaching record highs. The Dow Jones Industrial Average also experienced significant gains, driven by the financial and energy sectors. The market’s strong performance can be attributed to a combination of factors, including impressive corporate earnings, an accommodative Federal Reserve, and the ongoing economic recovery from the pandemic.
