Investors breathed a sigh of relief as US stocks closed higher on Friday, with the Dow Jones Industrial Average reaching a record high for the second consecutive day. The S&P 500 and the Dow capped off a four-month winning streak in August, fueled by renewed optimism for a soft landing of the economy.
The momentum in the market was supported by the personal consumption expenditures (PCE) inflation data, which met expectations. The PCE index rose by 0.2% and 2.5% on a monthly and yearly basis, respectively, aligning with economist forecasts. This solidified expectations for a Federal Reserve interest rate cut at the upcoming September 18 policy meeting.
Interactive Brokers economist José Torres commented, “Optimism regarding the Fed’s upcoming easing cycle is growing after this morning’s PCE data and Consumer Sentiment report reflected dwindling price pressures and downwardly revised inflation expectations.” The positive data provided further reassurance to investors.
Looking ahead, all eyes are on the release of the August jobs report scheduled for Friday, September 6. Any signs of weakness in the labor market could prompt the Fed to consider a larger 50 basis point interest rate cut next month, instead of the anticipated 25 basis point cut.
Economists anticipate an addition of 162,000 jobs to the US economy in August, which could nudge the unemployment rate slightly lower to 4.2% from 4.3%.
As the market closed on Friday, the following index levels were recorded:
– Dow Jones Industrial Average
– S&P 500
Additionally, in commodities, bonds, and crypto trading:
– West Texas Intermediate crude oil dropped 3.32% to $73.39 a barrel.
– Brent crude, the international benchmark, fell 2.61% to $76.76 a barrel.
– Gold saw a 1.03% decrease to $2,533.90 an ounce.
– The 10-year Treasury yield rose by five basis points to 3.917%.
– Bitcoin declined by 0.86% to $58,861.
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