MW S&P 500's turbulent week ends with stocks rallying after inflation report
By Christine Idzelis
'I think the Fed is pretty close to declaring "mission accomplished" when it comes to inflation,' says Raymond James CIO
U.S. stocks bounced Friday after a turbulent week for the S&P 500, as investors weighed fresh data on inflation from the Federal Reserve's favored gauge.
"I think the Fed is pretty close to declaring 'mission accomplished' when it comes to inflation," said Larry Adam, chief investment officer at Raymond James, in a phone interview Friday.
Inflation, as measured by the personal-consumption expenditures price index, edged up 0.1% in June for a year-over-year rate that slowed to 2.5%, according to a report Friday from the Bureau of Economic Analysis. The Fed's preferred gauge of core inflation, which excludes food and energy prices, rose 0.2% last month for an annual rate of 2.6%, the PCE data showed.
The inflation report renewed investor optimism that the Fed may start cutting interest rates as soon as September. The Dow Jones Industrial Average DJIA jumped 1.6% on Friday, while the S&P 500 SPX rallied a sharp 1.1% and the technology-heavy Nasdaq Composite COMP climbed 1%.
Still, the S&P 500 booked a weekly loss of 0.8%, dragged down by slumping Big Tech stocks such as Google parent Alphabet Inc. $(GOOGL)$ $(GOOG)$, chip maker Nvidia Corp. $(NVDA)$ and EV maker Tesla Inc. $(TSLA)$ Alphabet dropped 6% on the week, while Nvidia sank 4.1% and Tesla tumbled 8.1%, according to FactSet data.
"I still like tech," said Adam. "It's still one of our favorite sectors."
While the S&P 500's information-technology sector XX:SP500.45 fell 2.4% this week, it's still up 23.4% this year through Friday, FactSet data show. Tech remains easily the best performer among the S&P 500's 11 sectors so far in 2024.
"The sectors that we like - technology, industrials and healthcare - tend to have more exposure to business spending, as opposed to the consumer," Adam said. He expressed concern that consumers are becoming more "crimped" amid some signs of softening in the U.S. economy.
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Meanwhile, industrial stocks should benefit in part from business spending on artificial-intelligence data centers and U.S. companies seeking to reshore manufacturing plants, according to Adam.
The S&P 500's industrials sector XX:SP500.20 closed 1.7% higher Friday, becoming the index's top-performing sector for the trading session, FactSet data show.
While massive Big Tech gains earlier in 2024 have propelled the S&P 500's climb this year of more than 14% through Friday, other areas of the market are rallying in July.
Small-cap equities as measured by the Russell 2000 index RUT, for example, jumped 1.7% Friday to book a third straight week of gains. Bank stocks and real-estate-related equities also rose this week, extending their big rallies so far this month.
Meanwhile, the Dow Jones Industrial Average finished Friday with a fourth straight week of gains, its longest weekly winning streak since May, according to Dow Jones Market Data. The blue-chip stock gauge closed just 1.5% below its record closing high on July 17.
"Investors are interested in taking more risk as the so-called soft landing looks more likely," said Jeffrey Roach, chief economist for LPL Financial, in emailed comments Friday. "We have an economy with low unemployment with rising wages, decelerating inflation and a Fed on the cusp of cutting rates."
-Christine Idzelis
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(END) Dow Jones Newswires
July 26, 2024 19:00 ET (23:00 GMT)
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