US Stocks Rally as Inflation Report Eases Rate Hike Concerns
US stocks rallied on Friday, closing out the trading week, as a cooler-than-expected inflation report and comments from Federal Reserve officials alleviated worries about the path of interest rates. The Personal Expenditure (PCE) index revealed a 2.4% annual rise, lower than the 2.5% estimate of economists.
Traders increased their expectations for Fed rate cuts in 2025, with the first one expected in March and another in October. This followed the Fed’s third interest-rate cut of the year, its forecast of just two 25-basis point cuts for 2025, down from its previous projection of four cuts.
Fed officials also acknowledged the impact of fiscal policy uncertainty, such as tariffs, on their outlook, which provided further support for the market. “It’s kind of obvious what’s going on – it’s just this PCE plus dovish Fed commentary offset the market overreaction to the hawkish cut that everybody was expecting,” said Jay Hatfield, CEO at Infrastructure Capital Advisors.
The Dow Jones Industrial Average rose 498.82 points, or 1.18%, to 42,841.06, while the S&P 500 and Nasdaq Composite gained 63.82 points, or 1.09%, and 199.83 points, or 1.03%, respectively.
Despite Friday’s rally, each of the three major US indexes declined for the week, with the S&P 500 dropping 1.99%, the Nasdaq declining 1.78%, and the Dow falling 2.25%.
