US stocks advanced on Friday after softer inflation data bolstered optimism that the Federal Reserve will maintain its rate-cutting trajectory, reinforcing hopes of continued economic support and higher equity valuations.
The Dow Jones Industrial Average rose 228 points, or 0.5%, while the S&P 500 gained 0.6% to hit a new record.
The Nasdaq Composite climbed 0.9%.
The Bureau of Labor Statistics’ September consumer price index, delayed due to the government shutdown, rose 0.3% from the prior month and 3% year-on-year, slightly below economists’ expectations of 0.4% and 3.1%.
Following the report, traders strengthened their expectations for further Fed rate cuts, with the CME FedWatch tool showing a 98.5% probability of a December reduction, up from 91% before the data release.
Odds for a cut at the upcoming meeting remained near 99%. The 10-year Treasury yield slipped below 4%.
While inflation ticked slightly higher than in August, broader economic data remains limited amid the shutdown.
Markets largely brushed off President Donald Trump’s announcement that he was ending trade talks with Canada over a controversial advertisement referencing former President Ronald Reagan’s remarks on tariffs.
Investor sentiment was further supported by strong corporate results.
Intel rose 5% after reporting third-quarter sales above expectations, while Procter & Gamble gained 3% following an earnings and revenue beat.
The major US indexes had also closed higher on Thursday, led by gains in technology stocks.
Nvidia and Oracle were among the biggest contributors to the Nasdaq’s 0.9% advance, while the S&P 500 and Dow rose 0.6% and 0.3%, respectively.
For the week, the S&P 500 is on track to gain 1.1%, with the Nasdaq and Dow each up about 1.2%, as investors head into the heart of earnings season with renewed confidence in the market’s resilience.
US inflation data comes in lower than expected
Consumer prices rose less than expected in September, according to the Bureau of Labor Statistics report released Friday, the only official economic data allowed during the government shutdown.
The consumer price index (CPI) increased 0.3% for the month, putting the annual inflation rate at 3%, below economists’ forecasts of 0.4% monthly and 3.1% annually.
The annual figure was up 0.1 percentage point from August.
Excluding food and energy, core CPI rose 0.2% for the month, with an annual rate of 3%, again below expectations of 0.3% monthly and 3.1% annually.
Core CPI had posted 0.3% monthly gains in both July and August.
Gasoline prices jumped 4.1% in September, the largest contributor to the report, while food prices rose 0.2% and overall commodity prices were up 0.5%.
Over the past year, energy costs rose 2.8% and food prices climbed 3.1%.
Within the food index, meat, poultry, fish, and eggs increased 5.2% year-on-year, while nonalcoholic beverages rose 5.3%.
Electricity prices were up 5.1% and natural gas surged 11.7%, though gasoline fell 0.5% over the same period.
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