FX.co ★ U.S. Stocks Mostly Higher As Inflation Data Adds To Interest Rate Optimism

### Market Update: Stocks Rebound on Inflation Data

Stocks have generally moved higher in Friday trading, with major indices showing gains after a mixed performance on Thursday. The Nasdaq and the S&P 500 are bouncing back, having ended the previous session at their lowest points in over a month.

Currently, the indices remain positive, albeit off their session highs. The Dow is up by 605.29 points, or 1.5%, at 40,540.36, the Nasdaq has risen by 125.02 points, or 0.7%, to 17,306.74, and the S&P 500 has gained 50.99 points, or 0.9%, to 5,450.21.

The rally on Wall Street follows the release of key inflation data from the Commerce Department, boosting confidence in a potential Federal Reserve interest rate cut in September.

According to the Commerce Department, the personal consumption expenditures (PCE) price index edged up by 0.1% in June, in line with expectations, after being flat in May. Additionally, the annual growth rate of the PCE price index slowed to 2.5% in June from 2.6% in May, also matching estimates.

Excluding food and energy prices, the core PCE price index increased by 0.2% in June, building on a 0.1% rise in May. Economists had anticipated another 0.1% increase. The annual growth rate of the core PCE price index remained steady at 2.6% in June, defying expectations of a slowdown to 2.5%.

Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics, commented, "The subdued rise in prices will give the Federal Reserve greater confidence that inflation is on track to moderate toward its 2% target." He added, "While we are not expecting the news to be quite as good in coming months, we think it would take a nasty upward surprise to inflation between now and September to derail the Fed from cutting rates at that meeting."

The inflation metrics, which are reportedly preferred by the Federal Reserve, were featured in the Commerce Department's report on personal income and spending. The report also indicated that personal income rose less than expected, while personal spending increased as forecasted by economists.

Meanwhile, the University of Michigan released revised figures showing that U.S. consumer sentiment deteriorated in July, but less than initially estimated. The consumer sentiment index was revised upward to 66.4 from the preliminary 66.0, though it remains down from 68.2 in June, marking the lowest level since November 2023.

### Sector Performance

Housing stocks are among the brightest spots in the market, with the Philadelphia Housing Sector Index surging by 3.1% to a record intraday high. Telecom stocks are also showing significant strength, as indicated by the 1.4% gain in the NYSE Arca North American Telecom Index, which is at its highest intraday level in over five months. Networking, gold, and transportation stocks are likewise performing well, reflecting broad market strength.

### International Markets

Asian markets had a mixed trading session on Friday. Japan's Nikkei 225 Index fell by 0.5%, while China's Shanghai Composite Index edged up by 0.1%. In Europe, major markets moved higher. The German DAX Index climbed by 0.5%, the U.K.'s FTSE 100 Index increased by 1.1%, and the French CAC 40 Index rose by 1.2%.

### Bond Market

In the bond market, treasuries saw gains following the inflation data, with the yield on the benchmark ten-year note falling by 5.5 basis points to 4.199%.