Stock Market Today: Dow Closes at Record High as Energy Stocks Surge with Rising Oil Prices

US stocks experienced a slight decline on Friday as investors processed economic data indicating that the Federal Reserve’s preferred inflation measure is approaching its 2% target, while consumer spending growth remained generally stable.

By 1:07 p.m. ET (1707 GMT), the benchmark S&P 500 was down 0.03%, the Dow Jones Industrial Average had increased by 205 points or 0.5%, and the Nasdaq Composite dipped by 0.3%.

Headline PCE Index Slows; US Consumer Spending Rises 0.2% in August

Consumer spending in the US grew at a slower-than-expected rate in August, coinciding with easing inflation pressures. According to data from the Commerce Department, personal spending, which represents over two-thirds of economic activity, increased by 0.2% in August, down from a revised 0.5% gain in the previous month. Economists had predicted a rise of 0.3%, marking the lowest growth in seven months.

Household income growth also unexpectedly decelerated to 0.2% from 0.3% in July, while expectations were for a slight increase to 0.4%. Kathy Jones, chief fixed income strategist at Charles Schwab, remarked on social media that while both figures are slowing, they are "not falling off a cliff." Recent wage gains have sustained consumer spending activity, despite some weakening in the US labor market.

Additionally, the personal consumption expenditures (PCE) price index, which Federal Reserve officials monitor for tracking inflation, rose by 0.1% on a monthly basis, falling short of expectations that it would align with July’s increase of 0.2%. On a year-over-year basis, the PCE cooled to 2.2%, lower than projections of 2.3% and down from 2.5% in July.

When focusing on core inflation by excluding volatile components like food and energy, the core PCE price index also slowed to a monthly increase of 0.1%, while year-over-year it edged up slightly to 2.7% from 2.6%, as anticipated.

This data follows the Fed’s decision to cut borrowing costs by a substantial 50 basis points last week, suggesting more cuts may be on the horizon later this year.

Middle East Geopolitical Tensions Rise

Increasing tensions in the Israel-Hezbollah conflict have affected risk sentiment, especially as Israel intensified its military actions in Beirut, diminishing hopes for a ceasefire.

As a result, defense stocks such as Lockheed Martin, Northrop Grumman, and Raytheon experienced gains.

Costco Faces Decline Despite Strong Fiscal Q4 Results

Costco Wholesale Corp saw a drop of over 1% in its stock price, despite reporting quarterly results that exceeded Wall Street expectations, largely driven by the retailer’s increasing market share.