The blue-chip Dow Jones Industrial Average hit a new record high on Friday as investors cheered a tame inflation report that also boosted small-cap stocks which should benefit from lower interest rates.
In afternoon trading, the Dow Jones Industrial Average finished at a record close of 42,313, up 137.89 points, or 0.3%. The blue-chip index had jumped more than 450 points to an all-time high of 42,628.32
Wall Street’s benchmark S&P 500 index dipped 0.1%, and Nasdaq dropped 0.4% as Nvidia lost 2.2%.
All three indexes registered their third consecutive week of gains.
The Russell 2000 index, which tracks small caps that fare better in a low rate environment, gained 0.7% to a one-week high.
“The market at this point..(is) pretty much pricing in a soft landing, and pricing in that we have defeated inflation, and that the Fed will be able to lower rates without causing a bunch of harm to the economy”, said Liz Young Thomas, head of investment strategy at SoFi in New York.
The Commerce Department reported a moderate rise in consumer spending while inflation pressures continued to ease. Separately, the University of Michigan’s final September reading on consumer sentiment came in at 70.1, surpassing economists’ expectations of 69.3, according to a Reuters poll.
Investors now slightly favor a bigger 50 basis point cut at the Fed’s next meeting with a 52.1% chance, up from a coin toss before the data, as per the CME Group’s FedWatch Tool.
Cooling price pressures prompted the Fed to cut rates by 50 bps last week. Focus will now shift to a slew of labor market reports due next week.
Late on Thursday, Fed Governor Lisa Cook said the central bank’s rare move earlier this month could address increased “downside risks” to employment.
Among individual stocks, Bristol-Myers Squibb rose 1.6% after the FDA approved its schizophrenia drug.
Costco Wholesale dropped 1.8% after posting downbeat fourth-quarter revenue.
US-listed shares of Chinese firms such as Alibaba rose 2.2%, PDD Holdings climbed 4.7% and NetEase gained 2.6% after China’s central bank lowered interest rates and injected liquidity into the banking system.
The optimism spilled over to miners such as Arcadium, which added 2%, and US-listed shares of BHP rose 1.9%.
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