Stocks jumped out of the gate Friday and never looked back. Boosting market sentiment was an encouraging reading on inflation – which hit just ahead of next week's Fed meeting – and a round of well-received earnings reports.
Starting with the inflation data. Ahead of the open, the Bureau of Economic Analysis said the Personal Consumption and Expenditures (PCE) Price Index rose 0.3% from May to June. The annual increase slowed to 2.5% from 2.6% the month prior. Meanwhile, core PCE, which excludes volatile food and energy prices, was up 0.2% month-to-month and 2.6% year-over-year.
The data also show that personal income rose at a slower-than-expected 0.2% monthly rate in June, while spending increased 0.3%.
What today's PCE report "signifies for the market is that the Fed is getting closer to cutting rates," says Anthony Denier , president and U.S. CEO of Webull . This could give a boost to stocks, but it's pretty well priced in, he adds.
And Greg Wilensky , head of U.S. fixed income at Janus Henderson Investors, says that there's "still a lot of data to be seen between now and the September meeting including two Consumer Price Index (CPI) prints, so a September cut is far from a certainty."
As for now, CME Group's FedWatch Tool shows futures traders are pricing in an 88% chance the Fed will cut rates by a quarter-percentage point in September.
Lower inflation could help boost M&A activity
In addition to lifting rate-cut expectations, tamer inflation data could spark a rebound in merger-and-acquisition (M&A) activity.
"In fact, activity on Datasite , which facilitates nearly 15,000 new deals annually, shows volumes are returning," says Mark Williams , chief revenue officer at Datasite Americas. Indeed, "global sell-side kickoffs on Datasite are up 17% [in the first six months of 2024] compared to the same period a year ago, while global buy-side deal kickoffs are even more robust, increasing 21%."
These deals are at their inception, so it gives a good indication of what's to come on the M&A front over the next nine or so months, Williams adds.
In single-stock news, Dexcom ( DXCM ) stock plunged 40.7% after the company, which makes continuous glucose monitoring devices, missed revenue estimates for its second quarter and lowered its full-year revenue forecast.
Still, Jefferies analyst Matthew Taylor (Buy) says the issues related to DXCM's top-line woes – including reorganization of its sales team – "are mostly execution based and 'fixable' over time."
Deckers pops after beat-and-raise quarter
Deckers Outdoor ( DECK ) stock soared 6.4% after the parent company of Ugg and Hoka topped revenue and earnings estimates for its fiscal first quarter and raised its full-year profit forecast.
"DECK once again delivered a strong quarter, beating sales and earnings per share expectations by wide margins, with both core brands showing continued momentum," says Wedbush analyst Tom Nikic (Buy). He adds that he remains a buyer of Deckers, given the company's "conservative" full fiscal-year guidance, which leaves the door open for upward revisions.
3M has its best day on record after earnings
3M ( MMM ) was arguably the most notable name on the earnings calendar , after the Post-it maker beat top- and bottom-line expectations for its second quarter and raised the low end of its full-year profit forecast.
The results indicate " significant traction on spending discipline, productivity enhancements, and restructuring efforts," says CFRA Research analyst Jonathan Sakraida , who maintained a Buy rating on MMM.
Not only was 3M easily the top-performing Dow Jones stock today, but its 22.9% surge marked its biggest one-day gain since FactSet began tracking the data in January 1972, according to MarketWatch .
Unsurprisingly, the Dow Jones Industrial Average handily outperformed, adding 1.6% to 40,589. The S&P 500 rose 1.1% to 5,459 and the Nasdaq Composite gained 1% to 17,357.
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