4:11pm: Closing out February on the front foot
Stocks rallied on Friday, closing out a turbulent February on a strong note as investors cheered cooling inflation data and looked past ongoing geopolitical tensions.
The Dow surged 601 points, or 1.4%, to close at 43,841. The S&P 500 jumped 93 points, or 1.6%, finishing at 5,955, while the Nasdaq climbed 303 points, or 1.6%, to end at 18,847.
Friday’s gains helped trim the month’s losses, though all three indexes still ended February in negative territory. The Nasdaq was down 5.5% for the month, while the S&P 500 and Dow each fell about 3%.
The rally was fueled by the release of the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) report, which showed inflation continued to cool in the past month. The data alleviated concerns that the Fed might delay anticipated interest rate cuts, boosting investor sentiment.
Despite the strong session, market uncertainty persists, particularly regarding President Trump’s proposed tariffs on Canada, Mexico, and China. Economists warn that such tariffs could lead to higher consumer prices, adding to inflationary pressures.
In corporate news, NVIDIA shares fell sharply earlier in the week despite exceeding earnings expectations, as its gross margin outlook disappointed investors. However, a rebound in the tech sector on Friday helped propel the broader market higher.
Looking ahead, investors will closely monitor upcoming economic reports, including durable goods orders, new home sales, and consumer confidence data, for further insights into the strength of the U.S. economy.
2:00pm: Uptick
Stock indices posted modest gains in early afternoon trading, as investors weighed economic data and geopolitical developments.
The Dow, S&P 500, and Nasdaq all rose 0.2%, signaling cautious optimism after a volatile week.
Despite today’s uptick, markets remain on track to close February with losses. The Nasdaq has borne the brunt of the decline, while the S&P 500 and Dow are also set to finish the month in negative territory. Investors continue to assess broader economic conditions as they position for the trading month ahead.
11:03am: Core PCE slows
Core PCE inflation in January was among the slowest since March 2021, Bill Adams at Comerica noted, while supercore PCE inflation was the slowest since then.
However, overall PCE inflation remained above its September low due to rising energy and egg prices.
Higher tariffs could push up prices for both imports and domestically produced goods, while increased deportations might tighten the labor market and drive wage inflation in sectors with worker shortages, Adams warned.
“January’s drop in consumer spending and jump in the trade deficit will both weigh on real GDP in the first quarter. The question is the extent to which they are one-offs,” Adams commented.
He expects import growth to remain high in February as companies front-load purchases ahead of potential tariff hikes, but this is likely a temporary drag on GDP.
9.48am: Nasdaq drops as PCE moderates
Wall Street faced a mixed start on Friday as personal consumption expenditure figures showed the Federal Reserve’s preferred measure of inflation had eased.
The Nasdaq shed a further 0.8% after the bell, as the S&P 500 moved slightly higher and the Dow Jones ticked up 0.3%.
Figures earlier on showed the PCE index had subsided from 0.4% to 0.2% between December and January and was up by 2.5% on an annual basis.
The core rate, which is closely watched by the Fed, came in at 2.6%, against an upwardly revised 2.7% in December in the meantime.
Focus had been on the figures for any insight into the path of rate cuts ahead given mounting uncertainty over the impact of tariffs under Donald Trump.
6.18am: Brighter start seen on Wall Street
Wall Street looked set for a brighter start to the week’s final session as attention turned to inflation with personal consumption expenditure figures.
Having faced a beating on Thursday on ongoing fears around Donald Trump’s tariffs and a slump by Nvidia Corp after earnings, stocks were seen regaining slightly.
Futures had the S&P 500 up 0.4% ahead of Friday’s opening bell, while the Dow Jones and Nasdaq looked to rise by 0.3% each respectively.
Given jitters Trump’s tariffs could stoke inflationary pressure, Friday’s core PCE data, or the Federal Reserve’s preferred measure of inflation, has drawn attention.
Expectations are for the core index to have climbed by 0.2% in January, against December’s 0.4% uptick, as the figure rises by 2.8% on an annual basis.
“With the Federal Open Market Committee taking on a hesitant approach in the face of rising inflation expectations under Trump, today is a chance to prove the case one way or another,” Scope Markets analyst Joshua Mahony said.