The Dow Jones Industrial Average reached a new all-time high on Friday as market participants responded positively to fresh data pointing toward continued inflation relief. According to a report by Brian Evans and Pia Singh for CNBC, Wall Street also appeared on course to close the week with strong gains, reflecting growing confidence in the Federal Reserve’s direction.

The Dow Jones advanced by 266 points, a rise of 0.6%, buoying investor sentiment. However, the S&P 500 remained relatively unchanged, while the Nasdaq Composite slipped 0.2%. The drop in the Nasdaq was largely due to a 3% decrease in Nvidia’s stock price, which weighed on the tech-heavy index, as reported by CNBC.

Looking at the broader market, all three major U.S. indices are expected to end the week on a positive note. The S&P 500 has gained close to 1%, the Dow Jones is set to rise by 0.5%, and the Nasdaq leads with a projected weekly increase of 1.5%.

A key driver of this optimism is the August Personal Consumption Expenditures (PCE) price index, a favored inflation gauge of the Federal Reserve. According to CNBC, the index rose by just 0.1%, in line with economists’ forecasts. On a year-over-year basis, inflation came in at 2.2%, slightly below the expected 2.3%, indicating a potential easing of price pressures.

Market participants and Fed policymakers are closely monitoring inflation, hoping it will continue to cool. Lower inflation would give the Federal Reserve more confidence to further reduce interest rates, ultimately lowering borrowing costs for both corporations and consumers. This easing could stimulate the economy by providing relief to both business balance sheets and household budgets.

Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, pointed out to CNBC that with inflation trending lower, the Federal Reserve could turn its focus more heavily toward the labor market. In his view, the prospect of further rate cuts could boost both stock and bond markets, especially in the absence of economic contraction. Additionally, lower interest rates could benefit consumers who are sensitive to rate fluctuations, such as those managing loans or mortgages.

This upward momentum follows a strong Thursday session where additional economic data underscored the resilience of the U.S. economy. CNBC highlighted a better-than-expected drop in initial jobless claims, reflecting the ongoing strength of the labor market. Furthermore, the final GDP reading for the second quarter confirmed a robust 3% growth, reinforcing positive sentiment on Wall Street.

Featured Image via Pixabay