The U.S. personal consumption expenditure index for June showed no increase in inflationary pressure, which had a positive impact on the market. Investor expectations for a rate cut by the Federal Reserve this year were further strengthened, leading to a broad rally in major U.S. stock indexes on Friday.
The U.S. Department of Commerce released the June personal consumption expenditure index (PCE) on the evening of the 26th. The index rose by 2.5% annually, reaching a new low in 5 months, in line with market expectations and below the previous value of 2.6%. On a monthly basis, there was a growth of 0.1%, a slight increase from 0% in May, but still in line with expectations.
The core PCE price index, excluding energy and food, increased by 2.6% annually in June, slightly higher than the market’s expected 2.5%, but the growth rate remained the same as in the previous month of May, hitting a low point since March 2021.
This indicates that there has been no increase in inflationary pressure, which has had a positive impact on the market. Investor expectations for a rate cut by the Federal Reserve further strengthened, leading to a broad rally in major U.S. stock indexes on Friday, with the Dow Jones Industrial Average surging over 650 points and TSMC ADR rising by 1.04%.
CFRA Research analyst Sam Stovall pointed out that Friday’s market trends were driven by multiple factors, including oversold sentiment, Thursday’s better-than-expected GDP report, and expectations that the Federal Reserve would begin cutting rates due to economic recovery.
TradeStation analyst David Russell stated that the personal consumption expenditure data provided more evidence that inflation is in a downward trend.
All four major U.S. stock indexes rose, and seven tech giants rebounded
The U.S. stock market closed on the 26th with all four major indexes rising:
– The Dow Jones Index rose by 654.27 points, or 1.64%, to close at 40589.34 points
– The Nasdaq Index rose by 176.16 points, or 1.03%, to close at 17357.88 points
– The S&P 500 Index rose by 59.88 points, or 1.11%, to close at 5459.1 points
– The Philadelphia Semiconductor Index rose by 97.77 points, or 1.95%, to close at 5103.13 points
Regarding the seven tech giants in the U.S. stock market, except for Tesla and Google’s parent company Alphabet, which have not fully recovered from their financial shadows and saw a slight decline, the other five companies all saw gains. Meta closed up 2.71%.
Market rotation in the U.S. stock market
Additionally, it is worth noting that during this volatility, the performance of energy stocks and consumer staples concept stocks outperformed the broader market. Companies like Southern Co. and biotech company Amgen both hit historical highs.
Callie Cox, Chief Market Strategist at Ritholtz, pointed out:
Overall, the recent performance of the U.S. stock market indicates that the market remains optimistic about the economic outlook. The slowdown in inflation data, expectations of a rate cut by the Federal Reserve, and strong economic data are all driving the stock market higher, but investors are reminded to remain cautious of risks.