Wall Street Soars on Tame Inflation: Dow’s Best Day of 2024, Tech Rebound Stalls

Wall Street experienced a dramatic turnaround on Friday, with major indices and sectors closing in the green as investors responded positively to the latest corporate earnings releases and the continued indication that inflation is moving closer to the Federal Reserve’s target of 2%. The **Personal Consumption Expenditures (PCE) price index**, the Fed’s preferred measure of inflation, dropped to 2.5% year-on-year in June, matching expectations and falling to its lowest level since February 2021. The **core PCE**, which excludes volatile food and energy prices, remained steady at 2.6%, slightly exceeding forecasts. These positive economic data points fueled optimism, with investors now overwhelmingly expecting a **Federal Reserve interest rate cut** in September, attributing it a 100% probability, and projecting nearly three cumulative rate cuts by the end of the year.

Key Takeaways

• The U.S. stock market experienced a strong rebound on Friday, driven by positive earnings reports and continued deflationary pressures.
• The PCE price index, a key measure of inflation, fell to 2.5% year-on-year in June, signaling progress toward the Fed’s 2% target.
• The stock market is anticipating a rate cut in September with high probability and expects the Fed to lower rates at least three times by year-end
• Investor confidence remains high, with sectors like homebuilders experiencing significant gains and setting new records.
• Earnings reports continue to be a major driver of market movement, with some companies experiencing large gains while others saw declines.

A Bullish Friday on Wall Street

The **Dow Jones Industrial Average** led the day’s surge, gaining 1.9% and establishing its strongest session of the year. The tech-heavy **Nasdaq 100** rallied significantly, climbing 1.6%, halting its recent decline but failing to recover its negative weekly performance. The **Russell 2000**, an index tracking small-cap companies, also posted a solid gain of 1.3%.

Rate-sensitive sectors continued their upward trajectory, with homebuilders, as tracked by the **SPDR Homebuilders ETF (XHB)**, rising over 3% for the day, reaching all-time highs and marking their third consecutive positive weekly close. This surge in homebuilder stocks reflects the market’s anticipation of lower interest rates, which could stimulate demand in the housing market.

Bond Market and Commodities React to Positive Data

In the bond market, **Treasury yields** dipped slightly, particularly in longer-dated maturities, as investors reacted to the deflationary signals and increasing expectations for Fed rate cuts. The decline in yields indicates that bond prices are rising, a common trend when investors anticipate lower interest rates.

Gold prices also rallied, increasing by 1% on Friday, reflecting a potential shift in investor sentiment and a potential safe haven play in light of the economic uncertainty.

Oil prices, on the other hand, drifted lower by 1%, suggesting that the market may be adjusting to potential economic slowdowns that could dampen energy demand.

Major US Indices and ETF Performance on Friday

Here is a breakdown of the key indices and ETFs that drove the market’s performance. The data, updated at 1:00 p.m. ET, highlights the significant gains experienced across various market segments.

According to Benzinga Pro data, the major ETFs also mirrored the positive trend seen in the indices:

• The **SPDR S&P 500 ETF Trust (SPY)** was 1.5% higher, reaching $546.75.
• The **SPDR Dow Jones Industrial Average (DIA)** rose 2% to $407.34.
• The tech-heavy **Invesco QQQ Trust (QQQ)** climbed 1.5% to $465.21.
• Sector-wise, the **Industrials Select Sector SPDR Fund (XLI)** outperformed, up by 2.3%, while the **Energy Select Sector SPDR Fund (XLE)** lagged, up 0.5%.

Stocks That Moved on Earnings

The release of corporate earnings reports continued to be a major driver of stock price fluctuations. Here are some of the companies that saw notable movements based on their earnings performance:

• **3M Company (MMM)**, up 19%, likely due to strong earnings and a positive outlook, the stock saw significant investor interest.
• **Aon plc (AON)**, up 6.4%.
• **Avantor Inc. (AVTR)**, up 12%.
• **Barnes Group Inc. (B)**, down 3%.
• **BJ’s Restaurants, Inc. (BJRI)**, down 12%.
• **Booz Allen Hamilton Holding Corp. (BAH)**, down 10%.
• **Boyd Gaming Corporation (BYD)**, up 5.4%.
• **Bristol-Myers Squibb Company (BMY)**, up 9.7%.
• **Centene Corp. (CNC)**, up 9.8%.
• **Charter Communications, Inc. (CHTR)**, up 16.2%.
• **Colgate-Palmolive Company (CL)**, up 3.7%.
• **Deckers Outdoor Corporation (DECK)**, up 7.9%.
• **DexCom, Inc. (DXCM)**, down 42%, likely due to a disappointing earnings report, investors reacted negatively and drove the stock down significantly.
• **Franklin Resources Inc. (BEN)**, up 1.9%.
• **Juniper Networks, Inc. (JNPR)**, flat.
• **Mohawk Industries, Inc. (MHK)**, up 19%.
• **Newell Brands Inc. (NWL)**, up 39%, likely reflecting positive earnings and a bullish outlook for the company.
• **Saia Inc. (SAIA)**, down 20%.
• **SkyWest, Inc. (SKYW)**, down 6.5%.
• **T. Rowe Price Group (TROW)**, down 2.8%.
• **VeriSign, Inc. (VRSN)**, up 3.3%.

Outlook for the Markets

While the market witnessed a strong rebound on Friday, it’s essential to remember that this is just one day’s performance. Long-term market trends can be influenced by several factors, including economic data, geopolitical events, and investor sentiment. Ongoing volatility and uncertainty are likely to persist as investors continue to grapple with the broader implications of economic headwinds and the Fed’s monetary policy path.

It’s crucial for investors to remain vigilant, stay informed about developments, and consider their own investment goals and risk tolerance before making any decisions.