Stocks rose Friday as the Dow and S&P 500 each notched a fourth straight month of gains.
The Federal Reserve’s preferred inflation measure continued to show muted growth in July, providing additional support for a September interest-rate cut.
Today’s trading activity may have also been driven by end-of-month rebalancing.
For full coverage and analysis of the PCE report, click here.
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The Dow cruised to another record close as it wrapped up its fourth-straight monthly gain.
The blue-chip index rose 228 points, or 0.6%, marking its fourth record close of the week. The S&P 500 rose 1%, while the Nasdaq Composite was up 1.1%. The S&P has also risen in four-straight months. All three indexes jumped in the final 10 minutes of trading.
The Dow rose 1.8% this month, while the S&P 500 rose 2.3% and the Nasdaq rose 0.6%. That’s a shocking turnaround, given the Nasdaq entered correction territory early in the month and the S&P 500 and Dow both had their worst day since 2022 on Aug. 5.
For market participants who didn’t take the day off, the personal-consumption expenditures price index was the only major news of the day. The report was mostly in line with expectations, though the PCE price index did rise at a slower annual rate than expected.
The Federal Reserve is widely expected to begin cutting interest rates at its September meeting, and the report did little to change minds.
U.S. stock and bond markets will be closed on Monday for Labor Day. When trading resumes later in the week, a wave of economic data headlined by the August jobs report will provide the next major test for the stock market.
The Dow was trailing the other two major indexes on Friday because some of its most important stocks were struggling.
The Dow was down 36 points, or 0.1%, while the S&P 500 was up 0.3%. The Nasdaq Composite was up 0.4%. There’s not much happening in the stock market today, but roughly 313 S&P 500 stocks were on the rise.
Though 18 of the 30 Dow stocks were rising, the index was being weighed down by declines from some of its largest stocks. That includes Salesforce, with a $252 stock price and a 1.9% decline, and UnitedHealth Group, with a $587 stock price and a 0.7% decline. The Dow is weighted based on stock price instead of market cap, so companies with large stock prices can move the index more than megacap firms with smaller stock prices.
Don’t read too much into today’s moves. Not only is it the day before a holiday weekend, but it’s also end of month rebalancing. Lastly, it’s a slow economic news day, so the market is primed for a pause with a make-or-break employment report slated for next week.
The Dow looks set to wrap up August with a year to date gain of 9.7%. The S&P 500 is up nearly 18% this year. The Nasdaq Composite is up 17%.
The good times can continue if history is any guide. Going back to 1971, the S&P 500 has risen 70% of the time from Labor Day to the end of the year, according to Dow Jones Market Data. It’s averaged a gain of 2.8%. The Dow has risen 72% of the time and averaged a gain of 2.7%. The Nasdaq Composite has risen 68% of the time for an average gain of 3.4%.
Of course, this year may prove to be a bit more turbulent. Not only is the Federal Reserve looking to pilot the economy to a “soft landing” where inflation normalizes but a recession is avoided, but there’s also the presidential election. There’s also a question of how much higher highflying technology stocks like Nvidia can go.
The first major test will come on Tuesday, when we get ISM’s manufacturing survey, but Friday’s August jobs report will be the week’s headliner. Wall Street will want to see some signs of resilience. Otherwise, the recession fears could weigh on markets once again.
