Relatively mild inflation data gave a boost to major U.S. equity indexes as trading began on Friday, with market participants seemingly unfazed by new tariffs on trucks, pharmaceuticals, and kitchen cabinets. This positive sentiment emerged despite fresh evidence indicating a decline in consumer sentiment, which served as a temporary obstacle.
The trading session was marked by fluctuations, yet ended on an upward trend as the Federal Reserve’s preferred inflation measure aligned with expectations. The Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index saw an increase of 0.3% month over month and 2.7% year over year in August. Notably, the core PCE, without food and energy prices, rose 0.2% and 2.9%, matching anticipations. According to Jeffrey Roach, Chief Economist at LPL Financial, the core PCE indicates signs of normalcy.
Roach expressed that as long as businesses maintain a “low hire – low fire” approach, the labor market could remain stable enough to avert a recession. He noted, however, that this situation could pose challenges for the Federal Reserve, which aims to lower interest rates without igniting further inflation.
By the closing bell on Friday, the tech-heavy Nasdaq Composite climbed 0.4% to 22,484, successfully reducing its weekly loss to 0.7% and positioning itself for a potential gain in September. The S&P 500 rose by 0.6% to 6,643, breaking a three-day losing streak and ending the week down by just 0.3%, also on track for a September increase. The Dow Jones Industrial Average recorded a gain of 0.7% at 46,247, marking its first rise since Monday, while still showing a slight loss of 0.1% for the week but remaining positioned for a positive month overall.
In notable stock movements, Boeing (BA) soared by 3.6%, becoming the top performer among Dow stocks after the Federal Aviation Administration granted the company the authorization to issue its own airworthiness certificates for certain 737 MAX and 787 aircraft. This decision, following a rigorous review of Boeing’s production quality, allows for increased oversight of ongoing production processes. Additionally, Turkish Airlines placed orders for 75 Boeing 787 jets along with options for 150 smaller 737 MAX jets, and Boeing also announced a new order for 30 737 MAX jets from Norwegian Group.
Morgan Stanley analyst Kristine Liwag maintained an Equal-weight rating and a $235 target price for BA stock in a note issued Friday. She suggested that a recent shift in sentiment surrounding the stock had stalled following CEO Kelly Ortberg’s admission of some production challenges earlier in the month. However, Friday’s trading suggested a return to a more positive outlook based on improved 737 MAX and 787 deliveries.
Costco Wholesale (COST), on the other hand, experienced a downturn of 2.9% despite reporting fiscal fourth-quarter revenues totaling $86.2 billion—8.1% higher than last year—and earnings of $5.87 per share, exceeding forecasts. However, concerns regarding same-store sales growth, which came in at 5.7% against expectations of 5.9% and down from 6.9% a year ago, weighed on investor confidence. Analyst Michael Lasser from UBS reiterated his Buy rating and a 12-month target price of $1,205 for COST, emphasizing the retailer’s ability to maintain core margin growth.
Amid these developments, inflation remains a significant concern among consumers. According to the University of Michigan Surveys of Consumers, 44% of respondents cited high prices as a threat to their financial well-being, marking the highest level of concern in a year. The final sentiment reading for September indicated a decline of about 5% month-over-month, but still exceeded the lows observed earlier this year. Survey director Joanne Hsu noted that while the decline was modest, it was widespread across various demographics.
Looking ahead, the release of the nonfarm payrolls report for September on October 3 is anticipated to be a focal point for the upcoming economic calendar.
