The stock market rebounded on Friday, with the Dow Jones Industrial Average gaining nearly 500 points. This came after a tough week that saw the index plunge over 1,100 points in a single day, resulting in its longest losing streak since the 1970s. Cooler-than-expected inflation data contributed to the session’s gains.
November’s personal consumption expenditures price index showed a year-over-year increase of 2.4%, slightly lower than economists expected. This helped alleviate some of the bearish sentiment that arose earlier in the week when the Fed announced it would dial back future rate cuts due to persistent inflation. All 11 sectors of the S&P 500 ended the day higher, with real estate and information technology among the biggest gainers.
Only 53 stocks in the broad market index closed lower on Friday. Chicago Fed President Austan Goolsbee expressed optimism regarding the inflation figures. He noted that rates could still decline next year despite the central bank’s cautious stance.
“We’re still on the path to get to 2%, and at least for this new month, you don’t want to make too much out of any one month, but I’m hopeful that this suggests that the couple of months of firming were more of a bump than a change in path,” Goolsbee said. Despite the major averages jumping on Friday, all three booked losses on the week.
Stocks rebound amid easing inflation
The Dow lost nearly 2.3%, marking its third straight losing week. The S&P 500 fell almost 2% week to date, while the Nasdaq Composite was down about 1.8%. Elsewhere, a Trump-endorsed House Republican measure to fund the government for three months failed on Thursday.
Without a deal, a partial shutdown is set to start late Friday night. The PCE price index, the Federal Reserve’s preferred inflation gauge, showed an increase of just 0.1% from October and a 2.4% annual rate, both below expectations. Excluding food and energy, core PCE also increased 0.1% monthly and was 2.8% higher from a year ago, with both readings being 0.1 percentage point below the forecast.
Personal income rose 0.3%, short of the 0.4% estimate, while personal expenditures increased 0.4%, one-tenth of a percentage point below the forecast. The report comes just two days after the Fed cut its benchmark interest rate by another quarter percentage point to a target range of 4.25%-4.5%, the lowest in two years. However, Chair Jerome Powell and his colleagues reduced their expected path in 2025, now penciling in just two reductions compared with four indicated in September.
The stock market’s resilience amid inflationary pressures suggests potential for growth as investors navigate the closing days of 2024. The positive closing on Friday marks a hopeful note for traders looking to capitalize on a year-end market rally.
