U.S. Stocks Increase Following Positive Monthly Inflation Report

U.S. stocks showed gains on Friday, the last trading day of both the month and the quarter, buoyed by better-than-expected monthly inflation data that pleased investors.

As of 11:12 ET (15:11 GMT), the Dow Jones Industrial Average rose by 18 points, or 0.1%. The S&P 500 increased by 0.4%, while the Nasdaq Composite was up by 0.9%.

On Thursday, the main indices on Wall Street closed in positive territory, with the Nasdaq leading the way after a 0.8% rise. This upward momentum was partly supported by a decrease in Treasury yields from their 16-year highs.

As the month comes to a close, both the Nasdaq and the S&P 500 are set to record their worst monthly performances this year, while the Dow is on track for a 3% decline.

Recent attention has been focused on the Federal Reserve’s future interest rate decisions, a surge in oil prices, and an ongoing budgetary stalemate in Washington that poses the risk of a government shutdown.

PCE Data Highlights

In terms of economic data, the August personal consumption expenditures (PCE) price index, favored by the Federal Reserve as an inflation measure, exceeded expectations on a monthly basis. The headline PCE reported an annual increase of 3.5% and a monthly increase of 0.4%. Excluding volatile food and fuel prices, the core PCE came in at 3.9% annually and 0.1% for the month, slightly below forecasts.

Economists had anticipated a slight acceleration in the headline PCE reading for August, which would indicate persistent upward pressure on prices within the U.S. economy.

Federal Reserve officials are expected to closely monitor this metric as they contemplate any potential hikes to borrowing costs later in the year. The central bank recently held interest rates at 5.25% to 5.50%, suggesting that further tightening might be necessary in either November or December to help manage inflation.

Corporate Earnings: Nike Surprises

On the corporate front, shares of Nike Inc. surged by 6.1% following significantly better-than-expected fiscal first-quarter earnings, which overshadowed a revenue miss attributed to weakness in North America and an economic slowdown in China.

For the quarter, earnings per share reached 94 cents on revenues of $12.94 billion, surpassing analysts’ expectations of 75 cents per share on sales of $13.02 billion. Bernstein analysts praised Nike for delivering "a nice beat," while the company also reaffirmed its fiscal year 2024 guidance.

Oil Prices and Supply Outlook

Oil prices experienced gains during volatile trading on Friday, heading for a 2% increase this week, supported by supply constraints in the U.S. and anticipated demand growth in China during its upcoming Golden Week holiday.

Prices have surged by 30% in the past quarter, reaching their highest levels of 2023, bolstered by Saudi Arabia and Russia’s decision to extend production cuts until the year’s end. Additionally, U.S. storage levels at a major delivery point for oil futures are at their lowest since July 2022.

The strong travel activity expected in China during Golden Week is anticipated to further increase demand in the world’s largest fuel-importing nation.

Analysts are also closely watching the upcoming meeting of OPEC+ next week, where there are speculations that Saudi Arabia, the group’s leading member, may propose a reduction in voluntary supply cuts.