US stocks end sharply higher, dollar drops after inflation report
FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 2, 2024. REUTERS/Brendan McDermid/File Photo
NEW YORK :Wall Street surged on Friday and the dollar softened as cooler-than-expected inflation data helped investors look past the possibility of a government shutdown and fresh tariff threats from U.S. President-elect Donald Trump.
All three major U.S. stock indexes jumped more than 1 per cent, gold surged and benchmark U.S. Treasury yields eased from multi-month highs.
A report from the Commerce Department showed the PCE price index, the Federal Reserve's preferred inflation yardstick, came in cooler than analysts expected, supporting the narrative that price growth remains on a path toward achieving the U.S. central bank's 2 per cent target.
"The better-than-expected reading for PCE, which is the Fed’s favorite measure of inflation, allowed investors to breathe a sigh of relief because maybe inflation is not likely to be as much of a runaway situation as feared," said Sam Stovall, chief investment strategist of CFRA Research in New York.
Equity markets came under pressure throughout a busy week for central banks, led by the U.S. Federal Reserve, which signaled it would slow the pace of interest rates in the coming year.
Republican leaders in the U.S. House of Representatives said they would vote to keep the federal government operating beyond a midnight deadline and avert a damaging shutdown that could disrupt the Christmas holiday.
"The focus of the market over the last several days has been on the Fed's announcement that while they were lowering interest rates by 25 basis points, that they were going to begin to rein (future rate cuts) in, and it certainly shook the markets," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. "The potential government shutdown is the other big focus. Markets never like that."
The S&P 500, the Nasdaq and the Dow were all on course for weekly percentage declines.
The Dow Jones Industrial Average rose 497.22 points, or 1.17 per cent, to 42,839.46, the S&P 500 rose 63.93 points, or 1.09 per cent, to 5,931.01 and the Nasdaq Composite rose 199.83 points, or 1.03 per cent, to 19,572.60.
European stocks registered their worst week in over three months as Trump's comments about potential tariffs on the European Union spooked investors.
MSCI's gauge of stocks across the globe rose 8.20 points, or 0.98 per cent, to 847.61.
The STOXX 600 index fell 0.88 per cent, while Europe's broad FTSEurofirst 300 index fell 19.25 points, or 0.96 per cent.
Emerging-market stocks fell 7.38 points, or 0.68 per cent, to 1,074.38. MSCI's broadest index of Asia-Pacific shares outside Japan closed lower by 0.97 per cent, to 567.00, while Japan's Nikkei fell 111.68 points, or 0.29 per cent, to 38,701.90.
Treasury yields pulled back after cooler-than-expected inflation data bolstered expectations for two more rate cuts from the Federal Reserve in the coming year.
The yield on benchmark U.S. 10-year notes fell 4.2 basis points to 4.528 per cent, from 4.57 per cent late on Thursday.
The 30-year bond yield fell 2.2 basis points to 4.7194 per cent from 4.741 per cent late on Thursday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 0.4 basis points to 4.315 per cent, from 4.319 per cent late on Thursday.
The two-year note yield, which typically moves in step with interest-rate expectations for the Federal Reserve, fell 1.1 basis points to 4.308 per cent, from 4.319 per cent late on Thursday.
The dollar softened against a basket of world currencies, but remained on track for its third consecutive weekly advance.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.59 per cent to 107.79, with the euro up 0.64 per cent at $1.0428.
Against the Japanese yen, the dollar weakened 0.69 per cent to 156.35.
Bitcoin reversed its losses in the wake of the inflation data.
In cryptocurrencies, bitcoin fell 0.88 per cent to $96,462.00. Ethereum rose 0.72 per cent to $3,440.32.
Oil prices edged higher as the dollar eased from two-year highs and as PCE data bolstered expectations for two additional interest rate cuts from the Fed in 2025.
U.S. crude gained 0.12 per cent to $69.46 per barrel, while Brent settled at $72.94 per barrel, up 0.08 per cent on the day.
Gold surged after the inflation report but still appeared set for a weekly loss.
Spot gold rose 1.11 per cent to $2,622.62 an ounce. U.S. gold futures rose 1.41 per cent to $2,628.70 an ounce.
