Wall Street rallied on Friday, with the blue-chip Dow leading the rebound as some large tech and semiconductor stocks recovered from a week's sell-off, while a key inflation measure came in roughly in line with expectations, keeping expectations of an early rate cut in check.
The Dow Jones Industrial Average rose 787 points, or 2%, to 40,722. The S&P 500 and Nasdaq added 1.5%.
Industrial conglomerate 3M boosted the Dow Jones Industrial Average, sending its shares soaring more than 17 percent after it raised the lower end of its full-year adjusted profit forecast.
Chip-related stocks led the tech recovery, with the Philadelphia SE Semiconductor Index on track to snap a three-day losing streak, with Nvidia, Intel, Broadcom and Qualcomm rising between 1.2% and 2.6%.
The so-called “Magnificent Seven” stocks were mixed at the open, with Apple, Tesla and Alphabet falling between 0.5% and 1.4%, while Microsoft, Meta Platforms and Amazon rose between 0.4% and 2%.
The 10-year Treasury yield turned lower after the inflation data was released.
The data showed that the Personal Consumption Expenditures Price Index, the Federal Reserve's preferred inflation gauge, rose 0.1% in June from the previous month and 2.5% from a year earlier, both in line with expectations, but personal income fell short of expectations.
The moderate rise in prices underscores the improving inflation environment and suggests the Fed may begin easing monetary policy in September.
“This is a very good (inflation) report and further strengthens the soft landing thesis,” said Rick Meckler, a partner at Cherry Lane Investments.
Economically sensitive small caps rose, helping the Russell 2000 rise 1.7%, a trend that would mark its third consecutive week of gains if the trend holds.
After the data was released, expectations of a 25 basis point cut at the Fed's September meeting held steady at around 88%, according to CME FedWatch. Traders still broadly expect two rate cuts by December, according to LSEG data.
But the S&P 500 and Nasdaq are on track to fall for a second straight week as investors sell off tech stocks over the past few weeks. Disappointing results from Alphabet and Tesla led to a selloff in large caps and artificial intelligence stocks on Wednesday.
“Next week will be an even busier earnings week than this one, and after a tough week the market could see a summer Friday rally,” Meckler said.
Concerns about Wall Street's increasing reliance on a set of high-momentum stocks that are now believed to be overvalued are making underperforming sectors such as small and mid-cap stocks look more attractive now that an early rate cut is expected.
On the revenue side, Deckers Outdoor Inc. rose 11 percent after raising its full-year profit outlook, while oil services company Baker Hughes Inc. rose 3.4 percent after second-quarter profit beat expectations.
Medical device maker Dexcom Inc. saw its shares fall 40% after it cut its full-year earnings forecast.
Of the 206 S&P 500 companies that have reported second-quarter profits so far, 78.6% beat analyst expectations, according to LSEG data.
