Wall Street sets record highs on Fed rate cut optimism amid low inflation
Indexes reached record highs on Friday, propelled by inflation data that was cooler than anticipated, strengthening expectations for quicker rate cuts by the Federal Reserve. Additionally, positive earnings from Intel sustained investor optimism regarding AI. In September, US consumer prices rose slightly less than anticipated, leading traders to adjust their rate cut forecasts to an earlier timeline. They now expect three quarter-point reductions by March rather than April. “It’s quite positive (the data) and it certainly clears the way for the Fed to cut rates next week and leads to a higher expectation of at least two more cuts (by March),” said Eric Gerster. The Federal Reserve is poised to reduce interest rates by 25 basis points during its policy meeting on October 29. The economic landscape, however, continues to appear unclear, with business activity indicating a modest recovery in October. The White House has issued a warning that the inflation data scheduled for release next month may be delayed as the government shutdown continues into its 24th day. At 09:54 a.m., the Dow Jones Industrial Average increased by 366.58 points, or 0.78 percent, reaching 47,101.19. The S&P 500 increased by 53.54 points, representing a rise of 0.79 percent, reaching 6,791.75. Meanwhile, the Nasdaq Composite climbed 235.12 points, or 1.03 percent, to a total of 23,176.92. The rate-sensitive Russell 2000 index experienced an increase of 0.9 percent.
Intel surged 4 percent following the chipmaker’s impressive performance that exceeded third-quarter profit estimates, contributing to a positive trend in US earnings and propelling the Nasdaq higher. AMD and Micron Technology experienced increases of 5.7 percent and 3.4 percent, respectively, while Nvidia experienced an increase of 1.9 percent. The Philadelphia SE Semiconductor Index increased by 1.8 percent, reaching an all-time high. Procter & Gamble exceeded first-quarter expectations due to robust demand for its beauty and hair-care products, resulting in a 1.1 percent increase in its shares. Financials also increased by 1.1 percent. Intel’s performance established a promising outlook for the week ahead, as five of the ‘Magnificent Seven’ tech giants, including Apple and Microsoft, are poised to announce their results. Earlier this week, Tesla and Netflix reported disappointing results, impacting market sentiment.
Global markets experienced a brief period of stability following the White House’s announcement that US President Donald Trump is set to meet with his Chinese counterpart, Xi Jinping, next week as part of his Asia tour. The announcement ignited optimism regarding the potential alleviation of trade tensions between the world’s two largest economies, which have been affected by reciprocal tariffs and export restrictions. In a significant move, Trump ended all trade discussions with Canada following a political advertisement that featured the voice of the late US President Ronald Reagan to denounce tariffs. Alphabet experienced a 2.4 percent increase following Anthropic’s announcement that it would utilize tens of billions of dollars’ worth of Google’s AI chips to train its Claude chatbot.
Deckers Outdoor projected full-year sales that fall short of estimates, resulting in a 14.4 percent decline in its shares. Ford experienced a 9.3 percent increase following the carmaker’s third-quarter profit surpassing expectations. Alaska Air experienced a decline of 4 percent following the airline’s revision of its annual forecast, compounded by a technical outage that resulted in grounded flights until operations were resumed. On the NYSE, advancing issues outnumbered decliners by a ratio of 4.14 to 1, while on the Nasdaq, the ratio stood at 3.24 to 1. The S&P 500 achieved 25 new 52-week highs and one new low, whereas the Nasdaq Composite noted 76 new highs and 15 new lows.
