U.S. markets are heading toward record territory as investors cheer encouraging data on inflation and interest rates. The latest inflation report showed price increases slowing more than expected, easing pressure on consumers and raising hopes for additional interest rate cuts from the Federal Reserve.
The S&P 500 climbed 0.9% on Friday, nearing a new all-time high. The Dow Jones Industrial Average gained 411 points (0.9%), and the Nasdaq Composite advanced 1.2%. Both indexes were also on track to reach record levels.
Slower Inflation Sparks Optimism
The latest consumer price data suggests that inflation may finally be cooling, offering relief to lower- and middle-income households still coping with higher living costs. More importantly for Wall Street, this trend increases the likelihood that the Federal Reserve will continue cutting interest rates to support the slowing labor market.
The Fed recently cut its benchmark rate for the first time this year, but officials have remained cautious about promising more reductions. Lower rates stimulate the economy but can also reignite inflationary pressures. However, following Friday’s data, traders are betting with near certainty that the Fed will implement rate cuts at its next two meetings, including one scheduled for next week.
According to Brian Jacobsen, Chief Economist at Annex Wealth Management, “Right now, Fed officials are more concerned about the labor market than about inflation.” With no evidence to contradict that stance, markets are confident that the central bank will maintain a dovish approach.
Stocks Rebound After Volatility
Despite recent market shakiness, the S&P 500 has surged 35% since April. Some analysts have warned that stocks became overpriced after valuations outpaced earnings growth, while others expressed concern about bad loans on bank balance sheets and rising political tensions over tariffs.
Even so, Wall Street has repeatedly shrugged off setbacks. Encouraging financial updates from major banks and news that President Donald Trump plans to meet with China’s President Xi Jinping next week have also lifted investor sentiment.
Corporate earnings have generally exceeded forecasts, further fueling the rally.
Corporate Winners: Ford, Intel, and Alphabet
Ford Motor Co. (NYSE:F) jumped 9.4% after reporting stronger-than-expected quarterly earnings. The automaker said its operations are tracking at the high end of its projected financial range for the year.
Intel Corp. (NASDAQ:INTC) rose 1.2% after posting impressive profit growth, driven by soaring demand for artificial intelligence applications. CEO Lip-Bu Tan credited AI’s rapid expansion for creating “attractive opportunities” in computing.
Alphabet Inc. (NASDAQ:GOOGL) gained 3% after AI firm Anthropic announced a major expansion that will boost its use of Google Cloud technologies for its chatbot Claude. Alphabet was one of the top contributors lifting the S&P 500.
Procter & Gamble Co. (NYSE:PG) also added 0.8% after surpassing earnings expectations. CEO Jon Moeller noted that the company behind Charmin and Pampers achieved solid results despite “a challenging consumer and geopolitical environment.”
Gold Slips as Stocks Shine
Not every asset benefited from Friday’s optimism. Newmont Corp. (NYSE:NEM) fell 4.8% even after reporting stronger profits. The decline followed a period of extraordinary gains—Newmont shares had surged nearly 139% earlier in the year, mirroring gold’s remarkable rally.
Gold prices, up 56% year-to-date, have recently cooled as investor appetite shifts toward equities. Analysts caution that gold’s meteoric rise may have outpaced fundamentals, especially as confidence in the stock market strengthens.
Global and Bond Market Moves
Overseas, major Asian and European markets mostly gained ground. South Korea’s Kospi climbed 2.5%, and Japan’s Nikkei 225 advanced 1.4%, marking some of the strongest international moves.
In the bond market, yields remained relatively stable. The 10-year U.S. Treasury yield slipped to 4.00% from 4.01%, reflecting steady expectations for further rate cuts.
Meanwhile, a University of Michigan survey showed mixed consumer expectations about inflation. Short-term inflation expectations edged down to 4.6%, while long-term projections rose slightly to 3.9%.
Bottom Line
With inflation cooling and the Fed poised to cut rates, optimism is returning to Wall Street. Investors are betting that lower interest rates will sustain the market’s record-breaking momentum into the next quarter—unless inflation surprises again.
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