After a turbulent week of trading, US stocks closed with a flash of optimism on Friday as investors mounted a comeback fueled by promising inflation data and expectations of upcoming interest-rate cuts. The Dow Jones Industrial Average added 1.6%, or more than 650 points, while the S&P 500 rose about 1.1% and the Nasdaq Composite put on 1%, despite both indexes being in the red for the week.
The positive turn in the market came after a series of turbulent sessions that saw Big Tech earnings undermining confidence in the AI trade, leading to an exodus from megacaps into small cap stocks. The Nasdaq and the S&P 500 both took a hit over the week, with the Nasdaq shedding 2% and the S&P losing about 1%. Only the Dow managed to emerge with a gain of roughly 1%.
Investors are now questioning whether the recent sell-off is a turning point towards sustained lower prices or just a typical bull-market pullback. Earnings-fueled concerns about softness in the US economy have been a major factor, although Thursday’s surprisingly hot GDP print helped ease some of those worries.
Friday’s big data point was the Personal Consumption Expenditures (PCE) index, a closely watched indicator that provided more evidence of a still-strong economy and gradually cooling inflation. The “core” PCE, which excludes food and energy costs, rose slightly higher than expectations but at its slowest pace in over three years.
The positive reading sets the stage for next week’s Fed policy meeting, where officials are expected to keep interest rates unchanged. However, many anticipate that this meeting could be the last before the central bank begins lowering rates in September.
Looking ahead, investors are gearing up for quarterly earnings reports from tech giants like Apple, Microsoft, Amazon, and Meta, as well as other corporate giants like McDonald’s, Starbucks, Boeing, and Exxon Mobil. The market will also be closely watching for any hints from the Fed about the timing of future rate cuts and how they plan to navigate the current economic landscape.
