Stocks Surge on Cooling Inflation, Fueling Expectations for Aggressive Fed Rate Cut

Investors embraced the latest inflation report, which showed a continued easing of price pressures, as a crucial factor in the Federal Reserve's upcoming decision on interest rate cuts. The stock market rallied, with the S&P 500 reaching new record highs, as traders bet on a more dovish stance from the central bank.

Riding the Wave of Optimism: Stocks Poised for Impressive Weekly Gains

Inflation Cools, Boosting Hopes for a "Soft Landing"

The August reading of the Personal Consumption Expenditures (PCE) index, the inflation metric favored by the Fed, showed a slower-than-expected increase in prices. The "core" PCE index, which excludes volatile food and energy costs, rose just 0.1% month-over-month, lower than Wall Street forecasts. This data point has fueled growing conviction that the Fed can engineer a "soft landing" as it embarks on a rate-cutting campaign, with more than half of traders now expecting a 50-basis-point cut at the next policy meeting.The cooling inflation has been a crucial factor in restoring confidence in the economy, with the stock market on track for weekly gains. Investors have been buoyed by a solid GDP reading and the continued moderation in price pressures, which has reinforced the belief that the central bank can navigate the delicate balance between taming inflation and supporting economic growth.

China's Stimulus Measures Provide Additional Boost

Alongside the positive domestic developments, China's latest round of stimulus measures has also contributed to the market's upbeat sentiment. Mainland stocks have scored their biggest weekly gains since 2008, and luxury stocks are set for their best week in years as hopes for Chinese demand rise. The buying spree has lifted the shares of major Chinese tech giants like Alibaba, JD.com, and Meituan, further fueling the market's momentum.

Costco's Gold Rush: Precious Metal Sales Shine Amid Broader Retail Performance

While the overall market sentiment has been positive, not all individual stocks have followed suit. Costco, the wholesale giant, saw its stock slip in morning trading after its revenue disappointed Wall Street. However, the company's performance has been bolstered by a surprising surge in gold bar sales, which have been a "meaningful tailwind" to its e-commerce business. Costco began selling gold bars in the fall of 2023, and the precious metal has become a significant contributor to the company's bottom line, with sales up "double digits" in the most recent quarter.

Intel Navigates Potential Deals and CHIPS Act Funding

In other news, Intel's stock edged up on Friday as the company reportedly nears a deal to secure $8.5 billion in CHIPS Act funding from the US government. Separately, the chipmaker has also been approached by Arm Holdings, which expressed interest in acquiring Intel's product business. While Intel rebuffed the offer, the news has added to the ongoing speculation around the company's strategic direction, with Qualcomm and investment firm Apollo also reportedly exploring potential takeover opportunities.As the market continues to ride the wave of optimism, investors will closely monitor the Fed's next move and the impact of China's stimulus measures on the global economy. The cooling inflation and the potential for more aggressive rate cuts have set the stage for a promising week ahead, with the stock market poised to build on its recent record-breaking performance.