The S&P 500 Index ($SPX) (SPY) on Friday closed up +0.59%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.65%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.44%. December E-mini S&P futures (ESZ25) rose +0.60%, and December E-mini Nasdaq futures (NQZ25) rose +0.44%.
Stock indexes settled higher on Friday. The broader market garnered support from Friday’s reports on consumer spending and core PCE inflation. Friday’s report on Aug personal spending rose more than expected at the strongest pace in five months. Also, Friday’s report on the Aug core PCE price index, the Fed’s preferred gauge of inflation, came in right on expectations, which could allow the Fed to continue lowering interest rates. However, gains in stocks were limited after US consumer sentiment unexpectedly fell to a 4-month low.
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US semiconductor makers found support Friday after The Wall Street Journal reported that the Trump administration is considering a new plan to reduce the US’s reliance on chips made overseas, aiming to spur domestic manufacturing and reshape global supply chains.
Pharmaceutical stocks rose Friday despite President Trump’s plan to impose 100% tariffs on drug imports. According to Jeffries, the plan appears to be a “win” for the pharmaceutical industry, as many major drug makers have a production presence in the US and have announced increased investment directly tied to local manufacturing.
US Aug personal spending rose by +0.6% m/m, stronger than expectations of +0.5% m/m and the largest increase in 5 months. Aug personal income rose +0.4% m/m, stronger than expectations of +0.3% m/m.
The US Aug core PCE price index, the Fed’s preferred gauge of inflation, rose +0.2% m/m and +2.9% y/y, right on expectations.
The University of Michigan US Sep consumer sentiment index was unexpectedly revised lower to a 4-month low of 55.1, weaker than expectations of no change at 55.4.
The University of Michigan US Sep 1-year inflation expectations were revised lower to 4.7% from the previously reported 4.8%. Also, the Sep 5-10 year inflation expectations were revised downward to 3.7% from the previously reported 3.9%.
Comments from Richmond Fed President Tom Barkin on Friday were slightly hawkish, as he noted that the uncertainty that had pervaded the economic outlook earlier in the year has started to lift for US companies, and he sees limited risk of further deterioration in employment and inflation.
A potential negative factor for market sentiment is the likelihood that the US government will shut down on October 1 if lawmakers fail to pass a spending bill by then. The White House issued a memo late Wednesday that said a shutdown would trigger widespread dismissals of employees in government programs that don’t align with President Trump’s priorities.
Rising corporate earnings expectations are a bullish backdrop for stocks. According to Bloomberg Intelligence, more than 22% of companies in the S&P 500 provided guidance for their Q3 earnings results that are expected to beat analysts’ expectations,