Stocks climbed higher on Friday, as investors were encouraged by in-line inflation data to cap off a week that ultimately ended in losses on a high note.
The Dow Jones Industrial Average (NYSE: DIA) rose nearly 300 points on Friday to settle at 46,24.29, while the broader market S&P 500 (NYSE: SPY) added 0.6% to end the session at 6,643.70. The tech-heavy Nasdaq Composite (NASDAQ: QQQ) also advanced over 0.4% to close at 22,484.06.
Despite the day's rally, all three major indexes ended the week in the red, with the S&P 500 notably snapping a three-week winning streak as some of the momentum from the artificial intelligence boom began to lose stream. The broader market index fell 0.7% for the week, while the Nasdaq lost 0.3%. The Dow also declined 0.2%.
Capturing the major of investor attention on Friday, August's personal consumption expenditures (PCE) index increased slightly month-to-month in figures that were in-line with economist consensus, the Commerce Department reported.
The headline PCE rose 0.3% over July to bring the annual inflation rate to 2.7%, only a tick above July's reading of 2.6%. Core PCE, which excludes food and energy prices and one of the key inflation measures tracked by the Federal Reserve, rose 0.2% month-to-month in August to put the annual inflation rate to a seasonally adjusted 2.9%.
The report comes as the market is currently pricing in two more interest rate cuts from the central bank this year, according to CME Group's FedWatch tool, as policymakers work to support their dual-mandate of keeping prices near a stable 2% inflation rate while maximizing employment levels. However, the better-than-expected labor market data and an upward revision for the United States' second-quarter gross domestic product (GDP) reading this week could dampen some of that sentiment as the Fed could remain hawkish in response to a strong U.S. economic backdrop.
Elsewhere, September's final reading on consumer sentiment also came in-line with Wall Street expectations on Friday, the University of Michigan's survey showed. The month's headline reading slipped 5.4% month-to-month to 55.1, marking a 21.6% annual decline as most Americans remained concerned with persistently high inflation and softening economic outlooks.
Survey director Joanne Hsu noted that while sentiment declines were seen "across a broad swath of the population," consumers with "larger stock holdings" saw their sentiment remain stable in September, while those with "smaller or no holdings" continued to report diminishing outlooks.
"Consumers continue to express frustration over the persistence of high prices, with 44% spontaneously mentioning that high prices are eroding their personal finances, the highest reading in a year," Hsu added.
On the earnings front, Costco (NASDAQ: COST) reported better-than-expected fourth-quarter earnings late Thursday, benefiting from strong gains in both membership income and its ecommerce sales, each rising about 14% and 13.5%, respectively. The wholesale retailer's same-store sales also rose 6.4% when excluding the impact from changes in gas prices and foreign exchange currencies, marking two straight quarters of deceleration.
Chief Financial Officer Gary Millerchip said during the company's earnings call with analysts that consumers are seeking "everyday value items," as they "remain very choiceful in their spending on discretionary items." Millerchip added that the retailer expects consumer shopping habits to "look a little different from years past" this holiday season.
UBS analysts wrote in a note to clients on Friday that they believe Costco is "well-positioned" to maintain its current momentum despite the lagging same-store sales growth, benefiting from "a) its expanded hours; B) its new merchandise slated for the holiday season; C) the momentum of its Kirkland signature brands; and D) its opportunities in digital."
Looking ahead, next week hosts another busy week of Fedspeak and economic data, including a slew of labor market reports on job openings in August and private payroll additions for September. Key earnings reports due out next week include Carnival Corp (NYSE: CCL), Nike (NYSE: NKE) and ConAgra Brands (NYSE: CAG).