Stocks were trading higher Friday amid more signs that inflation in the U.S. has been cooling, but the battle to fight rising prices isn’t over yet, said officials at the Federal Reserve.
Dow Jones Industrial Average
rose 269 points, or 0.8%, on Friday to 33,660, the
gained 1% and the tech-heavy
Stocks were poised to close higher for the week after bumpy trading. The S&P 500 closed down 0.1% Thursday, but the index has risen more than 2% so far this week for its fourth week of gains.
Data released this week have given rise to the belief that U.S. inflation may have peaked, allowing the Federal Reserve to be less aggressive when boosting interest rates.
Tom Essaye, founder of Sevens Report Research, said on Friday that the “S&P 500, being where it is right now, reflects that the market believes not only will inflation peak, but that the Federal Reserve will also get less hawkish and inflation will recede.”
Economic data released on Friday could also be helping push stocks higher. The Bureau of Labor Statistics reported that U.S. import prices decreased 1.4% in July after advancing in June, which was more than economists’ estimates of a 0.9% decline.
Jeffrey Roach, chief economist at LPL Financial, said that these declining prices “support the market’s thesis that the economy is past headline peak inflation” and that the continuing decline of imported food and beverage prices likely show the “beginning of a long process of overall price normalization.”
The University of Michigan’s consumer sentiment index released Friday moved up about five index points above the all-time low reached in June. Those lows arrived while consumers were dealing with red-hot inflation and rising interest rates. The report also showed that over the next five to 10 years consumers are expecting inflation to run at 3%.
“That’s pretty high,” Essaye said. “The five-year inflation expectations really reflect long-term planning and whether or not higher prices are sort of becoming entrenched in the minds of consumers and in the minds of corporate America. If that’s the case, then that will make the Fed get even more aggressive.”
San Francisco Fed President Mary Daly said that the central bank’s fight against rising inflation wasn’t over. She told Bloomberg Television that inflation data for July are “significant in that they are saying that we’re seeing some improvement but they’re not victory.”
Daly added her base case calls for an interest-rate hike of 50 basis points when the Fed next meets in September, following the last two more aggressive rates boosts of 75 basis points. But the Fed president told Bloomberg she hasan “open mind” if the data point to another large increase being necessary.
Richmond Fed President Thomas Barkin told CNBC the central bank was “happy to see inflation start to move down,” but he’d like to see “a period of sustained inflation under control.”
“Until we do that, I think we’re just going have to continue to move rates into restrictive territory,” Barkin added.
The CME FedWatch tool indicates that 55.5% of investors are anticipating the Fed will boost rates by 50 basis points in September. The probability for a rate hike of 75 basis points was at 44.5%. This is a change from Aug. 5, when 68% of investors anticipated a rate hike of 75 basis points.
Here are some stocks on the move Friday:
(ticker: ILMN) sank 9% after the gene-sequencing company cut its earnings guidance for the full year. Second-quarter adjusted earnings also missed analysts’ estimates.
(RIVN) was down 1.5% after the maker of electric trucks, reported a wider-than-expected loss for its second quarter, but maintained its production estimates for the full year.
(POSH) declined 9% after the online marketplace issued a revenue forecast that was weaker than expected.
The technology platform for restaurants,
(TOST) climbed 9.5% after raising full-year guidance and posting better-than-expected second-quarter results.
Write to Joe Woelfel at firstname.lastname@example.org and Angela Palumbo at email@example.com
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