The S&P 500 and Nasdaq opened at all-time highs on Friday, buoyed by a favourable inflation report. At the opening bell, the Dow Jones Industrial Average (.DJI) climbed 118.8 points, or 0.27%, to 43,505.6. The S&P 500 (.SPX) gained 9.7 points, or 0.16%, to start at 6,150.7, while the Nasdaq Composite (.IXIC) advanced 49.4 points, or 0.24%, to 20,217.264.
Consumer prices edged up slightly in May, while the annual inflation rate moved further away from the Federal Reserve’s target, according to a report from the Commerce Department on Friday. The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure of inflation, increased by 0.1% on a seasonally adjusted basis for the month, bringing the annual inflation rate to 2.3%. Economists surveyed by Dow Jones had predicted these same numbers of 0.1% for the month and 2.3% for the year.
When excluding food and energy, the core PCE index rose 0.2% in May, bringing the annual rate to 2.7%, slightly above the expected 2.6%. The core PCE is viewed by the Fed as a more reliable gauge of long-term trends due to the price volatility of food and energy. This rate was 0.1 percentage point higher than in April.
The Fed aims for an inflation rate of 2%, a level that hasn’t been seen since early 2021. In addition to inflation, consumer spending and income showed signs of slowing. Spending fell by 0.1% in May, instead of the expected 0.1% increase, while personal income dropped 0.4%, falling short of the forecasted 0.3% gain.
The report arrives as the Federal Reserve weighs its next move on interest rates. Schlossberg noted that the data helps “keep hopes alive” for a rate cut in July, although he still considers such discussions “premature.” President Trump has been pushing the Fed to lower rates, arguing that inflation is under control and the central bank can always adjust if prices start rising again. However, Fed Chair Jerome Powell has maintained a more cautious stance, despite increasing pressure from Trump. The president has been openly critical of Powell, calling him “stupid” earlier this week and hinting that he may soon nominate a new Fed chair.