Stocks traded mixed on Friday but closed the week on a high as investors embraced an inflation report seen as crucial to the Federal Reserve's next decision on interest rate cuts.
The Dow Jones Industrial Average (^DJI) gained 0.3% and finished with a fresh record. The S&P 500 (^GSPC) lost 0.1%, but is coming off a record-high close from the prior session. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) sank about 0.4%.
Despite the mixed trading on Friday, the stock gauges all recorded wins for the week after confidence in the economy returned to the market. The Dow and the S&P added about 0.7%, while the Nasdaq rose 1%.
A solid GDP reading, combined with continued cooling in inflation, has cemented growing conviction that the Fed can nail a "soft landing" as it embarks on a rate-cutting campaign.
The August reading of the Personal Consumption Expenditures (PCE) index, the inflation metric favored by the Fed, showed continued cooling in price pressures. The "core" PCE index, which is most closely watched by policymakers, rose 0.1% month over month, lower than Wall Street forecasts.
The PCE reading appeared to goose up bets on another jumbo-sized rate cut from the Fed next month. More than half of traders — around 52% — now expect a 50 basis point cut.
Mixed trading on Friday still came with weekly wins as all three major gauges were in the green for the week. Investors appeared to welcome the latest inflation report that showed price pressures continuing to sink towards the Federal Reserve's 2% target.
The Dow Jones Industrial Average (^DJI) gained 0.3% or more than 100 points to clinch a record close. The S&P 500 (^GSPC) lost 0.1%, but is only coming down from a fresh record of its own. The tech-heavy Nasdaq Composite (^IXIC) sank about 0.4%, but led the weekly wins overall, gaining 1%, compared to the S&P and the Dow's 0.6%.
Laura Bratton
Chip stocks close lower despite earlier gains
US chip stocks fell Friday after a week of ups and downs. The PHLX Semiconductor Index (^SOX) dropped nearly 1.8%, but remains up 4.3% from last week.
Micron (MU) fell down around 2.2% after skyrocketing Wednesday on its raised outlook for the upcoming quarter, fueled by AI demand. Micron was the first chipmaker to report financial results this earnings season, and its positive report raised fellow chip stocks such as Advanced Micro Devices (AMD).
Some negative news for Nvidia (NVDA) came when AI server maker Super Micro Computer (SMCI), one of Nvidia’s biggest customers, saw shares plummet Thursday after reports of a DOJ probe into alleged accounting violations. Bloomberg also reported Friday that the Chinese government is pressuring companies to buy AI chips within its borders rather than from Nvidia. Nvidia fell 2.2%, though analysts said there was no singular reason for the stock’s drop.
Daniel Newman, CEO of the Futurum Group, noted that semiconductors are a volatile industry. Nvidia stock has also been more volatile since its 10-for-1 stock split in June, Newman said.
Bob O’Donnell, founder of TECHnalysis Research, said Nvidia and other chip companies still display strong fundamentals and will likely continue to perform at high levels. Newman said that there is “strong optimism right now from the top leaders across the industry.”
Hamza Shaban
A look at the week ahead
As a momentous September gives way to October, new jobs numbers will play a huge role in setting expectations for the days ahead.
The September jobs report, which is scheduled to arrive on Friday, will offer the latest snapshot of the labor market. Should unemployment come in line with expectations, that will likely paint the Fed in a favorable light, as central bankers decided to cut interest rates by 50 basis points. Their efforts to ease back a restrictive monetary policy were designed in part to protect a labor market that has cooled somewhat. If, however, jobs numbers come in worse than expected, the data will offer fuel to critics who have argued that the Fed acted too slowly in cutting rates.
Fed Chair Jerome Powell is set to offer remarks ahead of the jobs report, on Monday, as investors look for signals on the central bank's next move
On the corporate front, major names scheduled to report include Nike (NKE), Carnival (CCL) and Constellation Brands (STZ).
Yahoo Finance's Brent Sanchez has a graphical breakdown of what to watch next week:
Zuckerberg faces deposition in AI copyright lawsuit from Sarah Silverman and other authors
An array of authors, media outlets and other creative professionals have sued to stop AI companies from using their content on the internet, arguing that their works are being used without compensation in order to advance a new technology and market opportunities.
Meta CEO Mark Zuckerberg will soon play a direct role in one of the most important lawsuits tackling this subject. Earlier this week a US District Court judge overseeing a suit brought by authors including Sarah Silverman and Ta-Nehisi Coates rejected Meta's bid to prevent the deposition of Zuckerberg, the Associated Press reported Friday.
Meta had tried to block Zuckerberg's deposition by arguing that he does not have unique knowledge of the company’s AI operations and other Meta employees could provide the same information. Zuckerberg's participation will likely draw even more attention to the legal matter, similar to his high-profile appearances on Capitol Hill during Congressional hearings on the role of social media in society.
Hamza Shaban
New PCE reading supports case for smaller Fed rate cut in November
The result means that a bigger 50 basis point cut may be hard to justify at the Fed's next meeting in November, according to some Fed watchers.
The fact that core inflation year-over-year is holding the level of the last two months, and not dropping, lines up more with a scenario for a smaller cut — lest the job market substantially weaken between now and November.
"The core year-over-year at 2.7% suggests that another round of 50 basis points needs to come under careful scrutiny unless the labor market suggests weakness," said Quincy Krosby, chief global strategist for LPL Financial.
The consensus among Fed officials outlined last week is for two more 25 basis point rate cuts in 2024.
Proposed Biden Chinese car tech ban could cut US auto sales
Escalating economic tensions between the US and China could have further ramifications for the domestic auto industry.
On Friday the Commerce Department said a new proposal from the Biden administration to ban connected vehicles from China and key Chinese software in American cars could eat into US auto sales by more than 250,000 vehicles per year, as well as put pressure on prices to rise, Reuters reported.
US automakers and other companies selling to American consumers others "may be less competitive in the global market because of the relatively higher prices of their vehicles," the department said.
As many as 25,841 fewer vehicles would be sold annually if the rule takes effect, the Commerce Department said, adding that $1.5 billion to $2.3 billion in vehicle inputs from Chinese or Russian companies would also be impacted by the proposal.
Stocks traded mixed on Friday after investors were greeted with a fresh inflation report that showed prices continue to cool. In another economics update, consumer sentiment slightly beat expectations in September, with a reading of 70.1 surpassing the 69.4 that economists had projected.
The S&P 500 (^GSPC) ticked just above the flatline after eking out a third record-high close this week. The Dow Jones Industrial Average (^DJI) gained 0.7%, or more than 250 points while the tech-heavy Nasdaq Composite (^IXIC) sank about 0.3%.
Hamza Shaban
Stocks trending on Friday
Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday:
Costco (COST): Shares of the warehouse retailer sank more than 1% Friday morning after the company posted a mixed fourth-quarter earnings report. Revenue came in at $79.70 billion, falling slightly below the expected $79.96 billion. Meanwhile, US comparable sales, ex-gasoline and currency impacts, were better than analysts were expecting.
Cassava Sciences (SAVA): Shares of the biopharmaceutical company fell more than 10% after reaching a settlement with the US Securities and Exchange Commission over allegations that it advanced misleading claims about an Alzheimer’s clinical trial. The settlement amounts to over over $40 million
Acadia (ACHC): Shares of the behavioral health facilities chain fell roughly 18% Friday after settling with the US Justice Department to resolve allegations it knowingly billed patients for medically unnecessary inpatient behavioral health services. The agreed to pay nearly $20 million.
Hamza Shaban
Market bets rise for another jumbo rate cut
The latest encouraging reading of the Fed's preferred inflation gauge has shifted market forecasts for the likelihood of another 50-basis-point interest-rate cut.
On Friday, the Personal Consumption Expenditures (PCE) index showed that prices in August increased at a slower pace than expected on a monthly basis. That impacted the debate over the Fed's next policy rate decision, as central bankers move forward on winding down their tightening cycle.
After Friday's inflation release, investors were pricing in a 54% chance of a 50-basis-point rate cut at the Fed's November policy meeting. That compares with the 50% chance seen a week ago, per the CME FedWatch Tool.
If inflation continues to show signs of easing, that will likely pressure Fed officials to accelerate their plans to bring interest rates down, since elevated rates threaten the labor market and may lead to an economic slowdown that officials have thus far avoided.
Hamza Shaban
Costco's stock slips, but its gold bars are selling like hot cakes
Costco (COST) is slinging a lot of gold bars as prices for the precious metal continue to surge, report Yahoo Finance's Brooke DiPalma and Brian Sozzi.
Sales of gold were up "double digits" in the most recent quarter, the wholesale giant's CFO Gary Millerchip told analysts on an earnings call Thursday evening. Millerchip added that gold was a "meaningful tailwind" to e-commerce sales in the quarter.
Costco began selling gold bars in the fall of 2023. Wells Fargo analysts have estimated the company is moving bars worth $100 million to $200 million each month.
On its website, Costco sells its 1 oz gold bar for $2,679.99. You have to be a member to buy the bullion. It's also non-refundable, and there's a limit of five total units per membership.
Despite the hefty sales of gold, Costco's bread and butter is still hawking products like, well, bread and butter to cost-conscious shoppers.
Its fiscal fourth quarter, same-store sales growth came in at 6.9%, compared with estimates of 6.4% on Wall Street. E-commerce sales jumped 19.5%, slightly lower than the 19.63% growth rate analysts projected.
Stocks open higher as inflation measure shows more cooling
Stocks continued to build positive momentum on Friday morning as investors welcomed another update that showed price pressures easing. The encouraging inflation report spurred market expectations that the Federal Reserve may make another jumbo rate cut at its next policy meeting in November.
Intel stock edges up on news of CHIPS Act funding talks, reports of Arm offer
Intel (INTC) stock rose 1.8% in early trading Friday after the Financial Times reported that the chipmaker and the US government are on track to finalize $8.5 billion in CHIPS Act funding for the company by the end of the year.
Separately, Bloomberg reported that Arm Holdings (ARM) expressed interest in buying Intel's product business.
The potential offer from Arm, the British chip designer with high-profile partners including Google (GOOG) and Apple (APPL), was rebuked by Intel, unnamed sources told Bloomberg.
Intel has also reportedly been approached by Qualcomm (QCOM) and investment manager Apollo to buy the company in its entirety. Intel shares have climbed on the news over the past week, but are still down more than 50% from the beginning of the year. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)
Rival Qualcomm floated a friendly takeover, according to the Wall Street Journal, but such a deal could face blowback from antitrust regulators. Analysts have also cast doubt on whether a Qualcomm takeover would make sense for Qualcomm or Intel financially.
Josh Schafer
Fed's preferred inflation gauge shows prices increased less than Wall Street expected in August
The latest reading of the Fed's preferred inflation gauge showed prices increased at a slower pace than expected on a monthly basis in August.
The "core" Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy, rose 0.1% from the prior month during August. The reading, which is closely watched by the Federal Reserve, came in below the 0.2% expected by Wall Street and the 0.2% seen in July.
Over the prior year, prices rose 2.7% in August, matching Wall Street's expectations and topping the 2.6% rate seen in July.