4:18pm: Nasdaq Composite, S&P 500 win for fourth week in a row
The Dow closed Friday up 424 points, 1.3%, at 33,761, the Nasdaq Composite jumped 267 points, 2.1%, to 13,047 and the S&P 500 added 73 points, 1.7%, to reach 4,280.
The benchmarks ended the week on a high note, clinching the fourth-straight winning week for the Nasdaq Composite and S&P 500. Investors have reacted positively to CPI and PPI data released this week that suggested inflation may have already peaked.
“We are not arguing that the market will make new highs this year (we are more in the trading range camp), but we would not be surprised to see a run toward the highs as inflation eases and the Fed slows the pace of rate hikes,” Michael Darda, chief economist and market strategist at MKM Partners, said in a note, according to CNBC.
12.05pm: US stocks higher at midday
The major US indices were in the green at midday, as the markets play gold against the American greenback, and worry less about rising inflation rates.
At midday, the Dow Jones Industrial Average was up 0.6% to 33,541, the S&P 500 was up by 0.8% at 4,242, and the Nasdaq Composite was up by 0.6% at 12,921.
Michael Hewson, chief market analyst at CMC Markets, said receding inflation is tempering expectations that the Federal Reserve will be as aggressive as originally supposed when it comes to raising rates.
“The latest University of Michigan inflation survey was a bit of a mixed bag, with confidence improving in August, while one year inflation expectations declined to 5%, however five to 10-year expectations edged higher to 3%, from 2.9%.”
The University of Michigan consumer sentiment index rebounded to 55.1, from 51.5 in July, and now sits above June's all-time low of 50.
Hewson also noted the US dollar has seen a bit of a rebound today at the end of what has been a negative week for the greenback.
“Declining inflation expectations and weaker than expected inflation, has seen markets reduce the prospects of a more aggressive Federal Reserve when it comes to raising rates. This week’s inflation numbers have shifted the dial on a 75bps rate hike in September, to a less aggressive posture of 50bps,” Hewson said.
Another week of gains for gold prices, according to Hewson, has put the commodity close to $1,800 an ounce, which hints the US dollar bull run might have come to an end.
“It's also interesting to note that gold prices have risen alongside equity markets, which suggests there is little to no correlation between investor appetite for risk and gold prices,” Hewson said.
Meanwhile, Chris Beauchamp, chief market analyst at online trading platform IG, said the bounce in risk assets has made it through another day.
“The week is rounding out with further upside for equities, as the general positive feeling in the wake of this week’s inflation data continues,” Beauchamp said.
“But the drift higher seems set to carry on, especially since the market is apparently content to ignore any warnings about further US interest rate hikes, having been calmed by the downtick in US CPI and PPI this week,” Beauchamp said.
At midday, the major movers included On Semiconductor, up by 5.6% on news of positive year-over-year cash flow growth, plus Pinduoduo up by 4.8%, and Walt Disney up by 2.4%.
On the downside, Illumina was off 8.5%, Docusign shed 1.3% and Chevron was down 1.4%.
9.35am: Week set to end on positive note
US stocks opened higher on Friday on track to finish the week in positive territory off the back of better-than-expected inflation data.
Just after the open, the Dow Jones Industrial Average had added 132 points at 33,468 points, while the S&P 500 was up 21 points at 4,229 points and the Nasdaq Composite gained 75 points at 12,855 points.
In terms of major movers, gene sequencing company Illumina Inc (NASDAQ:ILMN) was down about 12% after posting quartely results that fell short of analyst expectations and slashing its earnings guidance for the full year.
SmileDirectClub Inc was up about 10% at the open as the stock rallied after plunging earlier in the week off the back of its 2Q earnings released after the bell on Tuesday.
6.30am: Rally resumes
US stocks were seen pushing higher again on Friday, looking to finish positively a week in which data showed US inflation seems to have already hit its peak fueling hopes Fed rate-setters may scale back future interest rate hikes.
Futures for the Dow Jones Industrial Average were trading 0.5% higher pre-market, while those for the broader S&P 500 index and the tech-laden Nasdaq-100 both added 0.6%.
The benchmark indexes had ended mixed on Thursday as investors took profits on some of the previous session's strong gains which followed the below-forecast US CPI data for July.
Craig Erlam, senior market analyst, UK & EMEA, OANDA commented: "It's been another very good week for equity markets, extending the run to four weeks in many cases as investors become more optimistic about the economic outlook. This week has been all about the inflation data and, frankly, it could be the dominant force in the markets now right up until the Jackson Hole symposium. The fact that inflation not only decelerated in the US but at a faster pace than the consensus forecasts was a double win and risk assets are feeling the benefit.
"Of course, it doesn't take much of a dive into the data to see that fuel prices are having a considerable impact, favourably for once. This isn't something that's going to sway the Fed at all even if it will ease the burden on the economy a little. The Fed will need to see broader signs of inflationary pressures softening to ease off the brake into year-end."
Erlam added: "It is worth highlighting also the apparent disconnect between the equity and bond markets. Equity markets give the impression that all is not as bad as it seemed - the Dow is less than 10% from its all-time highs - while the bond market has recession signals flashing red. The 2-10 inversion is not only apparent but this week it's the most inverted it's been in more than 20 years. How long can investors ignore that?"
Among economic data due on Friday, US import prices and the University of Michigan consumer sentiment survey are set to be released.
On the corporate front, shares of electric vehicle maker Rivian were lower pre-market after its earnings beat top and bottom-line estimates but the firm trimmed its full-year guidance and Illumina shares also fell after posting earnings results.
Contact the author at jon.hopkins@proactiveinvestors.com