Dow reaches new high on positive economic data boosting rate cut hopes

Wall Street news: Wall Street ended on a high note Friday as the Dow Jones Industrial Average marked its second consecutive all-time high on the back of positive economic data that enhanced expectations for a modest interest rate cut by the Federal Reserve in September.

Key US economic indicators released on Friday showed that consumer spending was solid in July, reinforcing the strength of the economy while keeping inflation in check, further stoking speculation that the Federal Reserve may opt for a 25-basis-point interest rate cut next month.

"Investors are interpreting this as another sign of a 'soft landing' for the economy," said Cameron Dawson, Chief Investment Officer at Newedge Wealth. "The latest report is perfectly balanced, offering the market exactly what it needed."

In this context, a "Goldilocks economy" means one with steady growth that avoids overheating, and, thus, runaway inflation.

Market Movers: Tesla, Amazon, Marvell Lead Gains

The biggest winners on the day included Amazon.com, up more than 3%, Tesla up over 3% and Broadcom up almost 4%. Marvell Technology jumped 9% after reporting a quarterly forecast above analysts' estimates.

Optimism on Friday was further set with the latest personal consumption expenditures report, not long after remarks from Federal Reserve Chair Jerome Powell last week that suggested possible policy changes.

Looking ahead, attention will shift to next week's economic data, notably the Labour Department's August jobs report, set to be released on Friday.

According to the CME Group's FedWatch Tool, market participants still widely expect a 25-basis-point rate cut by the Fed in September, though expectations of a more aggressive 50-basis-point cut have diminished in light of Friday's data.

A Volatile Month Ends on a Positive Note

Friday's gains marked the close of a rocky month on Wall Street, full of the labor market beginning to cool in August, as earlier signs indicated, amid growing fears of an impending recession in the US economy. The situation was further worsened by the Japanese yen carry trade, which further fueled the market's volatility.

The struggles faced by the S&P 500 overcame these difficulties and closed the week near record highs. With the US stock market shut for Labour Day, trading volume on US exchanges was lighter than usual, with 11.2 billion shares changing hands, compared to a 20-day average of 11.4 billion.

The wider S&P 500 rose 1.01 per cent to 5,648.40 points, the Nasdaq Composite Index inched up 1.13 per cent to 17,713.62 points, while the Dow Jones Industrial Average climbed by 0.55 per cent to finish at 41,563.08 points. All 11 S&P 500 sector indexes were higher, with consumer discretionary the best performer, up 1.9 per cent, while industrial sectors rose by 1.1 per cent.

During August, the S&P 500 rose 2.3 per cent, the Dow was up 1.8 per cent and the Nasdaq added 0.6 per cent.

Other Movers

Nvidia advanced 1.5 per cent after plunging 6.4 per cent on Thursday amid investor concerns inspired by the company's strong results and in-line forecast.

Novavax soared 8.6 per cent after the US Food and Drug Administration gave emergency use authorization for an updated version of the company's COVID-19 vaccine.

Ulta Beauty fell 4 per cent after the beauty retailer cut its annual forecast due to weaker demand for higher-end cosmetics and fragrances.

Intel gained almost 10 per cent after the chipmaker announced it was exploring strategic options for its business, which could include a merger. Dell Technologies also gained 4.3 per cent after raising its forecast for annual revenue and profit, citing its business tied to artificial intelligence.

Meanwhile, Trump Media & Technology Group declined 1.7 per cent to a record low, pulling down its market value to $3.9 billion, majority owned by former US President Donald Trump. Within the S&P 500, advancing issues outnumbered decliners by a 6.6-to-one ratio. The S&P 500 posted 79 new highs and two new lows, while the Nasdaq recorded 84 new highs and 77 new lows.

(With Reuters inputs.)