U.S. stocks hover near records/ Wall Street rallies/ stock market near highs/ Newslooks/ NEW YORK/ J. Mansour/ Morning Edition/ U.S. stock indexes hovered near record highs on Friday, buoyed by hopes that inflation is being tamed without triggering a recession. The S&P 500 rose 0.1%, marking another strong performance. Meanwhile, Chinese stocks had a stellar week, with Shanghai surging 2.9% and Hong Kong jumping 3.6%, boosted by government stimulus efforts to revive the world’s second-largest economy.
Wall Street Near Record Highs Amid Chinese Market Surge: Quick Looks
- US markets: The S&P 500 rose 0.1% after hitting a record high, with the Dow Jones up 0.3%.
- Inflation cooling: The Federal Reserve’s favored inflation gauge showed prices slowing, fueling optimism about rate cuts.
- China rally: Chinese markets closed their best week in years, with Shanghai up 2.9% and Hong Kong’s Hang Seng up 3.6%.
- Bond yields ease: Treasury yields fell slightly, with the 10-year yield dropping to 3.76%.
Wall Street Holds Near Record Highs as Chinese Stocks See Major Gains
Deep Look
On Friday, U.S. stock indexes hovered near their record highs, as hopes grew that the economy might pull off the rare feat of controlling inflation without tipping into a recession. The S&P 500 edged up by 0.1%, hitting its 42nd record of the year, while the Dow Jones Industrial Average rose by 141 points (0.3%). The Nasdaq composite also ticked up by 0.1% in early trading.
These gains came as Treasury yields eased, thanks to a government report that showed inflation slowing slightly more than economists had predicted for August. This report is closely watched by the Federal Reserve and solidified the idea that the central bank may be successful in bringing down inflation without causing a significant economic downturn.
Inflation Shows Signs of Cooling
The Federal Reserve has been aggressively raising interest rates over the past two years to control inflation, which peaked at uncomfortable highs. However, inflation has been steadily falling, and Friday’s Personal Consumption Expenditures (PCE) price index report—a key measure preferred by the Fed—showed prices rose only 0.1% in August. Compared to last year, inflation now stands at 2.2%, nearing the Fed’s target of 2%.
As inflation pressures ease, the Fed has already begun to cut interest rates, starting with an unusually large half-point reduction last week. Further rate cuts are anticipated in November and December to support growth in a cooling economy, with more reductions expected into 2025 and 2026.
Stock Market and Economic Outlook
While stocks are climbing toward record highs, uncertainties remain. U.S. employers have slowed hiring, and the report showed that consumer spending—a crucial engine of the U.S. economy—fell short of economists’ expectations in August. Incomes also grew less than expected, raising concerns about the ability of consumers to sustain spending levels as interest rates come down.
According to Brian Jacobsen, chief economist at Annex Wealth Management, lower interest rates can take time to boost consumer spending as they result in lower interest earnings on savings accounts. On the other hand, they make loans for purchases like homes and cars more affordable, which can stimulate spending over time.
Corporate News
Among notable movers on Wall Street, Costco Wholesale dropped 2.8% after reporting weaker revenue than expected in its latest quarterly earnings, even though its profits topped forecasts. Similarly, Vail Resorts, which relies on consumer spending, saw its stock plunge 6.9% after posting a larger-than-expected quarterly loss due to scant snowfalls at its Australian resorts.
Meanwhile, Trump Media & Technology Group slipped 0.4% following news that a major investor sold nearly all of its 5.5% stake in the company. Donald Trump, who owns more than half the company, has said he doesn’t plan to sell his shares. The stock, which has dropped from over $60 in March to under $14, is facing speculation about its future.
China’s Markets Post Best Week in Years
While U.S. markets were steady, Chinese stocks experienced a remarkable surge. The Shanghai Composite Index rallied 2.9%, marking its best week since 2008, while Hong Kong’s Hang Seng Index jumped 3.6%, its strongest week since 1998.
Chinese stocks soared following a series of economic stimulus announcements from the country’s central bank and government aimed at propping up its economy. Although investors remain cautious about the long-term success of these efforts, they were impressed by the scale of the measures compared to previous piecemeal attempts.
Bond Market Update
In the bond market, Treasury yields fell slightly as inflation data fueled hopes of further rate cuts. The yield on the 10-year Treasury note eased to 3.76%, down from 3.80% the day before, while the two-year Treasury yield—closely tied to Fed rate expectations—dropped to 3.59% from 3.63%.
