US stocks rose broadly on Friday after an in-line inflation report bolstered hopes for interest rate cuts in September, despite a slump in Nike shares following a disappointing annual sales forecast.

The Commerce Department's data showed the personal consumption expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, remained unchanged on a monthly basis in May and increased 2.6 per cent annually, meeting expectations.

Excluding volatile food and energy components, the core figure increased 0.1 per cent month-on-month and 2.6 per cent annually.

Chances of a rate cut in September increased to 68 per cent from 61 per cent before the data, according to LSEG FedWatch data.

"This is a perfect report - it gives the Fed the green light to cut in September and sets the stage for the dovish rhetoric to continue," said Jay Woods, chief global strategist at Freedom Capital Markets.

Traders maintained their bets on two cuts despite Fed projections of just one this year, hoping for a sustained downtrend in inflation as the economy remains susceptible to decades-high interest rates.

Megacaps including Apple, Nvidia, and Amazon.com rose between 0.2 per cent and 1.2 per cent.

Most of the S&P 500 subsectors were higher, led by tech stocks. The small-cap Russell 2000 rose 0.8 per cent to an over two-week high.

However, Nike shares slumped 17.1 per cent after forecasting a surprise drop in fiscal 2025 revenue, weighing on the broader consumer discretionary sector.

At 9:43 a.m. ET, the Dow Jones Industrial Average was up 133.28 points, or 0.34 per cent, at 39,297.34, the S&P 500 was up 16.64 points, or 0.30 per cent, at 5,499.51, and the Nasdaq Composite was up 42.09 points, or 0.24 per cent, at 17,900.77.

Richmond Fed President Thomas Barkin expressed a desire to proceed "deliberately" on policy, while the Fed's Mary Daly noted that the latest data was "good news that policy is working."

Comments from Fed official Michelle Bowman are also expected later in the day.

Investors also prepared for the final reconstitution of the Russell benchmark indexes, with the recent rally in AI-related stocks expected to leave a significant impact on their final shape.

Both the S&P 500 and the Nasdaq were set for gains in a week marked by a brief rout in AI-related stocks, Amazon.com reaching a $2 trillion market value for the first time, quarterly earnings from companies like FedEx and Micron Technology, and a mixed bag of economic data.

The two indexes were set for quarterly gains. However, the blue-chip Dow was on pace to end the quarter down 1 per cent, highlighting the divergence between the more tech-heavy indexes and the rest of the market.

Trump Media & Technology Group gained 4 per cent after a shaky performance from Democratic incumbent Joe Biden in the first presidential debate.

Optical networking gear maker Infinera jumped 18.4 per cent after Nokia announced it would acquire the company in a $2.3 billion deal.

Advancing issues outnumbered decliners by a 4.16-to-1 ratio on the NYSE and by a 2.18-to-1 ratio on the Nasdaq.

The S&P index recorded 12 new 52-week highs and one new low, while the Nasdaq recorded 35 new highs and 38 new lows.

(With Reuters inputs)

Wall Street surges following cooling inflation data

Chances of a rate cut in September increased to 68 per cent from 61 per cent before the data, according to LSEG FedWatch data.

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