PCE Report Boosts Stocks, Rate Cut Hopes Grow
Following a significant inflation data that generally confirmed bets on an interest rate decrease at the Federal Reserve’s September meeting, U.S. stocks increased on Friday, maintaining their gains.
The Dow Jones Industrial Average increased by 75 points, or 0.2%, the S&P 500 gained by 26 points, or 0.5%, and the NASDAQ Composite increased by 135 points, or 0.8%, at 09:32 ET (13:32 GMT).
As of August’s last trading day, the DJIA is expected to gain 1.2% and the S&P 500 is expected to gain about 1.3% monthly. Out of the three major averages, the Nasdaq Composite is the only one that has lost this month, down by about 0.5%.
PCE suggests a rate reduction.
According to Reuters-surveyed experts, the Personal Consumption Expenditure index—the Fed’s favored gauge of inflation—rose 2.5% annually in July, vs an estimate of 2.6%. Monthly, it increased by 0.2%.
Compared to estimates of 2.7%, core PCE, which removes volatile food and energy components, increased 2.6% annually last month.
The figure surprised observers who were expecting a modest increase in inflation during the previous month.
Because of the Fed’s numerous dovish signals, markets are still pricing in a rate cut in September. According to CME Fedwatch, traders are pricing in a 68% chance of a 25 bps drop and a 32% possibility of a 50 bps cut.
Data on the gross domestic product, which was made public on Thursday, indicated that the second quarter growth of the US economy above earlier projections. Other figures revealed a slightly larger than anticipated decline in unemployment claims.
Dell raises its yearly projections.
Dell’s (NYSE:DELL) shares increased by more than 3% in the business sector following an increase in the company’s yearly projections.
The shares of Ulta Beauty (NASDAQ:ULTA), which was hit by a decline in customer demand for its more expensive cosmetics and fragrances, plummeted 6% after the company lowered its year sales and profit projections.
Despite reducing its annual sales and profit projections, Lululemon Athletica (NASDAQ:LULU) saw a 3% increase in profits due to better-than-expected results. This was due to a slowdown in North American demand and selective consumer spending.
As the computer giant seeks to weather a steep slowdown, Intel (NASDAQ:INTC) is considering breaking off its foundry business and abandoning plans for new plants. This news caused Intel’s shares to rise more than 5%.
