Market Rally: Inflation Fears Ease, Stocks Soar
The US stock market experienced a significant upswing on Friday, with the Dow Jones Industrial Average surging 510.48 points, or 1.22%, to 42,852.72. The S&P 500 and Nasdaq Composite also saw substantial gains, rising 1.17% and 1.16%, respectively. This rally came as a welcome respite from a tumultuous week, marked by concerns over a potential government shutdown and fresh tariff threats from President-elect Donald Trump.
Cooler-Than-Expected Inflation Data Boosts Market Sentiment
A report from the Commerce Department revealed that the PCE price index, the Federal Reserve’s preferred inflation yardstick, came in lower than analysts expected. This news alleviated fears of rising inflation, supporting the narrative that price growth is on track to achieve the US central bank’s 2% target. Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, noted, “The big headline today is the PCE, which was reported at a lower inflation level than expected, and that’s good news.”
Central Banks and Government Shutdown Concerns
The market had been under pressure throughout the week, driven by central banks’ announcements, particularly the US Federal Reserve’s signal to slow the pace of interest rate hikes. Lawmakers in Washington were also scrambling to reach an agreement to raise the nation’s debt ceiling and avert a partial government shutdown. Ghriskey added, “The potential government shutdown is the other big focus. Markets never like that.”
Global Markets React
European stocks slid, setting a course for their worst week in three months, as President-elect Trump’s comments about potential tariffs on the European Union spooked investors. MSCI’s gauge of stocks across the globe rose 0.63%, while emerging market stocks fell 0.83%. Asian markets also saw declines, with Japan’s Nikkei falling 0.29%.
Treasury Yields and Currency Markets
Treasury yields pulled back after the cooler-than-expected inflation data, bolstering expectations for two more rate cuts from the Federal Reserve in the coming year. The dollar softened against a basket of world currencies, but remained on track for its third consecutive weekly advance.
Commodities and Cryptocurrencies
Gold surged after the inflation report, while oil prices dipped over concerns about weakening demand in 2025. Bitcoin pared its losses, gaining 0.08% to $97,370.00, and Ethereum declined 0.75% to $3,390.10.
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