In the 12 months to June, the PCE price index rose 2.5 percent, also in line with expectations, after a 2.6 percent increase in May.
An index of global stocks rose for the first time in four sessions on Friday as equities stabilized after a sharp sell-off and U.S. economic data pointed to an improving inflation environment, pushing Treasury yields lower.
The Commerce Department said the price index for personal consumption expenditures (PCE), the Federal Reserve’s preferred inflation indicator, rose 0.1 percent last month after being unchanged in May, matching estimates by economists polled by Reuters.
In the 12 months to June, the PCE price index rose 2.5 percent, also in line with expectations, after a 2.6 percent increase in May.
This data likely sets the stage for the Fed to cut rates in September, as the market generally expects.
“The latest trend builds on the market’s confidence that we are on a trajectory that will get us to 2 percent over the long term,” said Vail Hartman, rates strategist at BMO Capital Markets in New York.
“This is just another month of good inflation numbers from the Fed’s preferred inflation measure.”
The Fed is expected to hold its next policy meeting in late July. Markets see a less than 5 percent chance of a rate cut of at least 25 basis points (bps) at that meeting, but are fully pricing in a September cut, according to CME’s FedWatch Tool.
On Wall Street, U.S. stock markets closed with strong gains as small-cap stocks were again among the best performers in a market that has recently been moving toward undervalued names.
However, megacaps also showed signs of stabilization, with the Nasdaq rising about 1 percent after three straight days of declines, sending the index down nearly 5 percent.
The Dow Jones Industrial Average rose 654.27 points, or 1.64 percent, to 40,589.34, the S&P 500 rose 59.88 points, or 1.11 percent, to 5,459.10 and the Nasdaq Composite rose 176.16 points, or 1.03 percent, to 17,357.88.
Despite the gains, the S&P 500 fell 0.83 percent for the week. However, the Russell 2000 posted a third straight week of gains, rising 11.51 percent, its strongest three-week performance since August 2022.
European shares closed higher, partly supported by corporate results after two straight declines, but are still set for a weekly decline.
MSCI’s global equity index rose 6.69 points, or 0.84 percent, to 803.47, marking its second straight weekly decline.
The STOXX 600 index closed 0.83 percent higher, but closed 0.27 percent lower on the week. The broad European FTSEurofirst 300 index closed 17.10 points, or 0.85 percent, higher.
US Treasury yields were lower after the inflation data. The yield on benchmark US 10-year notes fell 6.2 basis points to 4.194 percent, the second daily decline in a row, but was slightly higher for the week.
The yield on 2-year government bonds, which typically moves with interest rate expectations, fell 5.6 basis points to 4.3873 percent, the fourth weekly decline in the past five years.
The dollar index, which compares the greenback to a basket of currencies including the yen and euro, fell 0.03 percent to 104.30, while the euro rose 0.1 percent to $1.0855.
The dollar also fell 0.1 percent to 153.78 against the yen after the PCE inflation figures, heading for its biggest weekly percentage drop against the Japanese currency since early May.
The yen has strengthened on expectations of a Fed cut, while the Bank of Japan is expected to tighten policy by raising interest rates and reducing bond purchases in the coming months. In addition, the BOJ’s likely intervention earlier this month supported the currency.
The pound rose 0.16 percent to $1.2871. The Bank of England also holds a policy meeting next week, although there is uncertainty over what action the central bank will take on interest rates.
US crude fell 1.43 percent to $77.16 a barrel and Brent fell 1.51 percent on the day to close at $81.13 a barrel on concerns about weakening Chinese demand and hopes for a ceasefire in Gaza.
(Only the headline and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First print: Jul 27, 2024 | 06:33 AM IST