Wall Street Surges on Cooler-Than-Expected Inflation Data
Wall Street surged on Friday, with all three major U.S. stock indexes jumping more than 1% as cooler-than-expected inflation data helped investors look past the possibility of a government shutdown and fresh tariff threats from U.S. President-elect Donald Trump.
The PCE price index, the Federal Reserve’s preferred inflation yardstick, came in cooler than analysts expected, supporting the narrative that price growth remains on a path toward achieving the U.S. central bank’s 2% target.
“The better-than-expected reading for PCE, which is the Fed’s favorite measure of inflation, allowed investors to breathe a sigh of relief because maybe inflation is not likely to be as much of a runaway situation as feared,” said Sam Stovall, chief investment strategist of CFRA Research.
Equity markets came under pressure throughout a busy week for central banks, led by the U.S. Federal Reserve, which signaled it would slow the pace of interest rates in the coming year. Republican leaders in the U.S. House of Representatives said they would vote to keep the federal government operating beyond a midnight deadline and avert a damaging shutdown that could disrupt the Christmas holiday.
The dollar softened against a basket of world currencies, but remained on track for its third consecutive weekly advance. Treasury yields pulled back after cooler-than-expected inflation data bolstered expectations for two more rate cuts from the Federal Reserve in the coming year.
Gold surged after the inflation report, but still appeared set for a weekly loss. Oil prices edged higher as the dollar eased from two-year highs and as PCE data bolstered expectations for two additional interest rate cuts from the Fed in 2025.