U.S. Stocks Surge To Record Highs As Inflation Data Reinforces Rate Cut Optimism

(RTTNews) - Stocks moved sharply higher during trading on Friday, extending the upward move seen over the course of the previous sessions. With the continued advance, the major averages all reached new record closing highs.

The major averages pulled back off their best levels going into the end the day but still posted strong gains. The Dow jumped 472.51 points or 1.0 percent to 47,207.12, the Nasdaq surged 263.07 points or 1.2 percent to 23,204.87 and the S&P 500 climbed 53.25 points or 0.8 percent to 6,791.69.

For the week, the S&P 500 shot up by 1.9 percent, while the Dow and the S&P 500 spiked by 2.2 percent and 2.3 percent, respectively.

The rally on Wall Street came following the release of a closely watched report on consumer price inflation that increased confidence the Federal Reserve will continue cutting interest rates in the coming months.

While most U.S. economic data has been postponed indefinitely due to the ongoing government shutdown, the Labor Department released a report showing consumer prices increased by slightly less than expected in the month of September.

The Labor Department said its consumer price index rose by 0.3 percent in September after climbing by 0.4 percent in August. Economists had expected consumer prices to rise by another 0.4 percent.

The report also said the annual rate of growth by consumer prices ticked up to 3.0 percent in September from 2.9 percent in August, although that was slower than the 3.1 percent jump expected by economists.

Excluding food and energy prices, the core consumer price index crept up by 0.2 percent in September after rising by 0.3 percent in August. Core consumer prices were expected to increase by another 0.3 percent.

The Labor Department also said the annual rate of growth by core consumer prices slowed to 3.0 percent in September from 3.1 percent August. Economists had expected the pace of growth to remain unchanged.

"Consumer inflation came in cooler in September, reinforcing expectations that the Fed will cut rates again at next week's policy meeting," said Nationwide Chief Economist Kathy Bostjancic.

She added, "We remain of the view that the Fed will cut the fed fund rate by another 50bps by year-end as the weakening in the labor market outweighs concerns about moderately higher inflation stemming mostly from the tariffs."

Buying interest was also generated in reaction to upbeat earnings news from big-name companies like Ford (F), Procter & Gamble (PG) and Intel (INTC).

Shares of Ford spiked by 12.2 percent after the auto giant reported third quarter results that exceeded analyst estimates on both the top and bottom lines.

Procter & Gamble also advanced by 0.9 percent after the consumer products giant reported fiscal first quarter results that exceeded expectations.

Meanwhile, shares of Intel pulled back well off their early highs but still rose by 0.3 percent after the semiconductor giant reported better than expected third quarter sales.

Sector News

Computer hardware stocks extended the rally seen during the previous session, with the NYSE Arca Computer Hardware Index surging by 3.2 percent to a new record closing high.

Substantial strength was also visible among banking stocks, as reflected by the 2.1 percent jump by the KBW Bank Index.

Semiconductor, brokerage and networking stocks also saw considerable strength, while gold stocks bucked the uptrend amid a modest decrease by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index jumped by 1.4 percent, while South Korea's Kospi surged by 2.5 percent.

Most European stocks also moved to the upside on the day. The U.K.'s FTSE 100 Index climbed by 0.7 percent and the German DAX Index inched up by 0.1 percent, although the French CAC 40 Index closed just below the unchanged line.

In the bond market, treasuries have shown a lack of direction over the course of the session. Currently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 3.995 percent.

Looking Ahead

The Fed's monetary policy announcement is likely to be in the spotlight next week, with the central bank widely expected to lower interest rates by another quarter point.

With the government shutdown likely to lead to the continued delay of U.S. economic data, the latest earnings news may also attract attention, as a slew of big-name companies are due to report their quarterly results.