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Wall Street ended higher on Friday as PCE inflation went down to its lowest in two years. Investors continued to show faith in the Fed’s recent assurance that it would be able to attain a soft landing for the economy. All three major indexes ended in the green.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.5% or 176.37 points to close at 35,459.09. Twenty-two components of the 30-stock index ended in positive territory, seven ended in negative, while one remained unchanged.
The S&P 500 gained 1%, or 44.76 points, to close at 4,582.17. Nine of the 11 broad sectors of the benchmark index ended in positive territory. The Communication Services Select Sector SPDR (XLC), the Consumer Discretionary Select Sector SPDR (XLY) and the Technology Select Sector SPDR (XLK) progressed 2%, 1.7% and 1.4%, respectively, while the Real Estate Select Sector SPDR (XLRE) receded 0.3%.
The tech-heavy Nasdaq advanced 266.55 points, or 1.9%, to finish at 14,316.66.
The fear-gauge CBOE Volatility Index (VIX) was down 7.5% at 13.33. A total of 10.1 billion shares were traded on Friday, lower than the last 20-session average of 10.5 billion. Advancers outnumbered decliners on the NYSE by a 2.64-to-1 ratio. On the Nasdaq, a 2.81-to-1 ratio favored advancing issues.
PCE Inflation Registers Lowest Level in More Than Two Years
On Friday, the Personal Consumption Expenditure (PCE) index for June showed a continued easing in inflation. Per the report, headline PCE inflation, which includes food and energy costs, increased 0.2% on the month and rose 3% on an annual basis. The annual growth was the lowest since March 2021, a period of two years and a quarter. It was a sharp decline from the 3.8% reported in May.
Core PCE gained 0.2% month over month, and 4.1% from the year-ago period. This annual rate was the lowest since September 2021. In May, the annual increase was at 4.6%.
The PCE inflation is often considered the central bank’s favorite inflation guide. Even as the Fed has signaled that we might not have seen the last of the interest rate hikes, it has also gone on to assure that currently it does not forecast a recession. Against this backdrop, the PCE inflation index for June coming in at a more than two-year low assumes further significance because it may be deemed one of the more indicative numbers encouraging the Fed to go slow on its policy tightening.
The three most widely followed indexes closed out last week with gains. The Nasdaq Composite advanced 2%, while the S&P 500 and the Dow Jones Industrial Average gained 1% and 0.7%, respectively.
Signals coming in from the Fed that it expects a soft landing for the economy helped boost investor confidence. What also helped boost morale was the 2.4% GDP advance estimate for the quarter. This exceeded expectations.
Economic Data
Per a report by the Bureau of Economic Analysis, Personal income increased 0.3% in June, after rising 0.5% in May. Personal spending increased 0.5%, after rising 0.2% in May. The personal saving rate was 4.3% in June, a decrease from 4.6% reported in the prior month.
The University of Michigan reported that consumer sentiment for July had been revised down to 71.6 from the previously reported 72.6.
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Stock Market News for Jul 31, 2023
Wall Street ended higher on Friday as PCE inflation went down to its lowest in two years. Investors continued to show faith in the Fed’s recent assurance that it would be able to attain a soft landing for the economy. All three major indexes ended in the green.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.5% or 176.37 points to close at 35,459.09. Twenty-two components of the 30-stock index ended in positive territory, seven ended in negative, while one remained unchanged.
The S&P 500 gained 1%, or 44.76 points, to close at 4,582.17. Nine of the 11 broad sectors of the benchmark index ended in positive territory. The Communication Services Select Sector SPDR (XLC), the Consumer Discretionary Select Sector SPDR (XLY) and the Technology Select Sector SPDR (XLK) progressed 2%, 1.7% and 1.4%, respectively, while the Real Estate Select Sector SPDR (XLRE) receded 0.3%.
The tech-heavy Nasdaq advanced 266.55 points, or 1.9%, to finish at 14,316.66.
The fear-gauge CBOE Volatility Index (VIX) was down 7.5% at 13.33. A total of 10.1 billion shares were traded on Friday, lower than the last 20-session average of 10.5 billion. Advancers outnumbered decliners on the NYSE by a 2.64-to-1 ratio. On the Nasdaq, a 2.81-to-1 ratio favored advancing issues.
PCE Inflation Registers Lowest Level in More Than Two Years
On Friday, the Personal Consumption Expenditure (PCE) index for June showed a continued easing in inflation. Per the report, headline PCE inflation, which includes food and energy costs, increased 0.2% on the month and rose 3% on an annual basis. The annual growth was the lowest since March 2021, a period of two years and a quarter. It was a sharp decline from the 3.8% reported in May.
Core PCE gained 0.2% month over month, and 4.1% from the year-ago period. This annual rate was the lowest since September 2021. In May, the annual increase was at 4.6%.
The PCE inflation is often considered the central bank’s favorite inflation guide. Even as the Fed has signaled that we might not have seen the last of the interest rate hikes, it has also gone on to assure that currently it does not forecast a recession. Against this backdrop, the PCE inflation index for June coming in at a more than two-year low assumes further significance because it may be deemed one of the more indicative numbers encouraging the Fed to go slow on its policy tightening.
Consequently, there was a broader rally seen in the market on Friday. Shares of Advanced Micro Devices, Inc. (AMD - Free Report) and QUALCOMM Incorporated (QCOM - Free Report) rose 1.7% and 2.9%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Weekly Roundup
The three most widely followed indexes closed out last week with gains. The Nasdaq Composite advanced 2%, while the S&P 500 and the Dow Jones Industrial Average gained 1% and 0.7%, respectively.
Signals coming in from the Fed that it expects a soft landing for the economy helped boost investor confidence. What also helped boost morale was the 2.4% GDP advance estimate for the quarter. This exceeded expectations.
Economic Data
Per a report by the Bureau of Economic Analysis, Personal income increased 0.3% in June, after rising 0.5% in May. Personal spending increased 0.5%, after rising 0.2% in May. The personal saving rate was 4.3% in June, a decrease from 4.6% reported in the prior month.
The University of Michigan reported that consumer sentiment for July had been revised down to 71.6 from the previously reported 72.6.