By David French
(Reuters) -Wall Street’s major stock indexes rose on Friday, on course to recoup some ground lost earlier in the week, as tech megacaps recovered and in-line inflation data supported bets that the Federal Reserve would cut interest rates in September.
The led the way, aided by industrial conglomerate 3M, which jumped 20% and was on track for its largest daily percentage gain in decades after it raised the lower end of its annual adjusted profit forecast.
The and were also set to end the week firmer, aided by rebounds in the megacap stocks that led the index’s declines in the two previous sessions.
Tesla (NASDAQ:) rose 0.3% and Alphabet (NASDAQ:) fell 0.1%, two days after their lackluster earnings had triggered Wednesday’s big market sell-off.
The other members of the so-called Magnificent Seven tech megacaps rose, led by Meta Platforms (NASDAQ:) which advanced 3%.
Chip stocks also gained, with the on track to snap a three-day losing streak with its 2% gain. Constituents Nvidia (NASDAQ:), Marvell (NASDAQ:) Technology, Broadcom (NASDAQ:), Texas Instruments (O:) and Qualcomm (NASDAQ:) each rose more than 0.9%.
The turned lower following the inflation data. [US/]
Economically sensitive small-cap stocks rose, with the jumping 1.2%, set for its third straight weekly gain in two months and its best three-week run since August 2022.
The moderate rise in U.S. prices underlined an improving inflation environment, potentially positioning the Fed to start easing policy in September. The central bank’s July monetary policy decision is due next week.
Adam Hetts, global head of multi-asset at Janus Henderson, noted that this week’s data, including Friday’s price report, have signaled a stable U.S. economy, which supports a September rate cut.
However, in a market which is “priced to perfection,” investors may sell off on any perceived upsets, he noted.
“We’ve had this emotional rollercoaster, from Goldilocks to growth scare, back to Goldilocks mode.”
Bets on a 25-basis-point cut at the Fed’s September meeting held steady at about 88% after the PCE reading, according to CME’s FedWatch. Traders still largely expect two rate cuts by December, LSEG data showed.
As of 2:01 p.m. ET, the S&P 500 gained 66.86 points, or 1.24%, at 5,466.08 points, while the Nasdaq Composite advanced 181.87 points, or 1.07%, to 17,365.99. The Dow Jones Industrial Average rose 690.12 points, or 1.73%, to 40,625.19.
However, the S&P 500 and the Nasdaq remained on track for a second straight week of losses after investors dumped tech stocks over the past few weeks.
Worries about Wall Street’s growing dependence on a set of high-momentum stocks, whose valuations now appear inflated, have made underperforming sectors like mid- and small-cap stocks seem more attractive, now that early rate cuts seem likely.
Industrials and Materials led gains across the S&P 500 sector indexes.
Among stocks boosted by earnings, Deckers Outdoor (NYSE:) jumped 7.5% after it raised its annual profit forecast, while oilfield services firm Baker Hughes climbed 5.3% after beating estimates for second-quarter profit.
Norfolk Southern (NYSE:) jumped 11.2%, on course for its largest daily percentage gain since March 2020, after the rail operator reported second-quarter profit above Wall Street estimates thanks to robust pricing.
Medical device maker Dexcom (NASDAQ:) slumped 40.9% after cutting its annual revenue forecast.
Of the 206 companies in the S&P 500 that have reported second-quarter earnings, 78.6% beat analysts’ expectations, LSEG data showed.
