Stock market news today: Dow rises 600 points after key Fed-watched inflation data

Fed officials will huddle next week to decide the next the next course of action on interest rate policy. While the market widely expects officials to hold rates steady in July, the meeting’s significance comes as officials hint at where they stand for their September meeting, when observers predict the first rate will arrive.

“We expect the Fed to keep its policy rate unchanged in July while signaling progress on reducing inflation has resumed,” said Bank of America Global Research analyst Michael Gapen in a report on Friday.

Even though Fed officials have indicated that recent inflation readings are encouraging, some analysts still do not believe that a September cut is guaranteed. Fed officials have emphasized that more data is needed before they can pull the trigger on an easing cycle.

“The Fed is optimistic that cuts are likely in the near-term, but we do not think it is willing to signal September is a done deal,” Gapen said. “It could happen, but it would depend on the data.”

Gapen also noted that easing inflation has prompted the Fed to emphasize both sides of its dual mandate, instead of just focusing on price stability. That will give officials leeway to cut rates for a variety of reasons.

“Cuts can happen because the economy cools, because inflation slows, or both.”

Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday.

3M (MMM): Shares of the manufacturing company rose more than 15% early Friday after raising the low end of its full-year adjusted earnings guidance and reporting second quarter sales that came in above expectations.

DexCom (DXCM): The manufacturer behind glucose monitors saw its shared plummet close to 40% Friday morning after the company shocked Wall Street with a cut its annual revenue forecast tied to fewer new customers and an internal restructuring.

Deckers Outdoors (DECK): Shares of the footwear designer rose 7% after the company reported Q1 results that beat estimates, with net sales of $825.3 million coming in better than the $807.8 million Wall Street was expecting. Deckers also raised its full-year profit forecast.

Coursera (COUR): The online learning platform that has been under pressure because of the looming threat of an AI-led disruption in education, surged more than 40% Friday after earnings came in above expectations. Coursera said it surpassed more than 2 million enrollments in its array of generative AI offerings.

This week’s topsy-turvy trading was fueled in part by fears of slowing growth, and second guessing tied to Big Tech’s AI push.

But Friday’s favorable inflation reading, which will boost the case for the Fed to start cutting rates, could help calm those fears, as more affordable borrowing will help the economy to continue to expand.

“Recently, the market has pivoted to fears of slowing growth over fears of sticky inflation, and we think both concerns are valid, but if the Fed is able to lower rates in a predictable and reasonable manner then the economy should continue to expand and inflation should (very slowly) proceed lower to the Fed’s target,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance, in a note on Friday.

A recent stream of encouraging inflation data has also helped minimize less favorable price pressure data from the first quarter, which Fed officials have said prompted them to rethink their rate-cutting timeline and instead instill a plan of higher rates for longer.

Without that impediment, central bankers now have more leeway to start cutting rates. “For the past few months the inflation data have been cooperating,” Zaccarelli said. And as long as the data keeps coming in to boost the Fed’s confidence in slowing inflation, multiple cuts could be in store for the year.

The final session of a volatile trading week had stocks set for a rebound as new inflation data showed easing price pressures, boosting investor confidence in a widely expected September rate cut.

The Dow Jones Industrial Average (^DJI) added 0.6%, or about 200 points, after the blue-chip index eked out a closing gain. The S&P 500 (^GSPC) rose about 0.8%, while the Nasdaq Composite (^IXIC) climbed 1.1%, both coming off a failed attempt to rebound from this week’s tech-led sell-off.

The latest reading of the Fed’s preferred inflation gauge showed prices increased slightly more than expected in June.

The core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Federal Reserve, rose 2.6% over the prior year in June; above economists’ estimate of a 2.5% increase and unchanged from the month prior. Still, the print marked the slowest annual increase for core PCE in more than three years.

Core PCE rose 0.2 % from the prior month, in line with Wall Street’s expectations for 0.2% and faster than the 0.1% increase seen in May.