Stocks Rebound as Oil Prices Retreat
U.S. equities rallied on Friday, recovering much of their weekly losses after oil prices retreated from recent highs. The S&P 500 gained 0.9%, ending a four-day slide, while the Dow Jones Industrial Average rose 509.19 points, or 1%, to 52,573.29. The Nasdaq composite also advanced 1%, adding 251.31 points to close at 26,333.04. The S&P 500 finished at 7,656.98, up 65.28 points. The pullback in oil provided relief to inflation-wary investors, and a government inflation report that aligned with forecasts further steadied the market.[S1][S2]
Brent crude, the international benchmark, fell 2.8% to settle at $104.61 per barrel after nearing $110 overnight. The decline eased some pressure on inflation, which remains stubbornly high. The Labor Department reported that U.S. consumers paid 3.4% more for gasoline, food, and other living costs last month compared with a year earlier. Although still elevated, the figure was close to what economists and Wall Street had anticipated, helping to calm markets.[S1]
Fed Rate Hike Expectations Strengthen
The inflation data reinforced traders' expectations that the Federal Reserve will raise its main interest rate at its meeting next week. Such hikes are the Fed's primary tool to combat inflation, working through the bond market to make borrowing more expensive, slow the economy, and reduce upward pressure on prices. The yield on the two-year Treasury, which reflects near-term Fed policy expectations, climbed to 4.64% from 4.56% late Thursday. Longer-term yields were more stable: the 10-year Treasury yield edged up to 4.97% from 4.95%, while the 30-year yield dipped to 5.35% from 5.37%.[S1][S2]
Economists suggest that rate increases could quell doubts about the Fed's commitment to controlling inflation. Concerns had mounted earlier in the summer about the central bank's credibility and its willingness to take necessary steps, even at the risk of short-term economic pain. Fed Chairman Kevin Warsh has avoided signaling the future path of interest rates, though he reassured investors in a speech late last month. President Donald Trump has advocated for lower rates. Brian Jacobsen, chief economic strategist at Annex Wealth Management, noted that symbolism can outweigh substance in monetary policy.[S1]
Consumer Sentiment Sours as Inflation Expectations Rise
The market rebound comes amid deteriorating consumer confidence. A preliminary report from the University of Michigan on Friday showed U.S. consumer sentiment falling, with declines among both Democrats and Republicans. Expectations for inflation over the coming year jumped to 4.6% from 4% last month, the highest reading since June. This trend worries the Fed and economists because it can spark a vicious cycle of behavior that exacerbates inflation.[S1]
Corporate News and Global Markets
In corporate developments, Kroger shares rose 2.5% after the grocer reported stronger quarterly profit than analysts expected and maintained its full-year profit forecast, despite trimming an important revenue growth measure. ACV Auctions soared 44.5% after Copart agreed to pay $10.50 in cash per share. Copart, whose online vehicle auctions sold over 4 million units last year, fell 2.8%. Oracle initially jumped 8.5% on better-than-expected profit and revenue but ended down 1.7% as gains faded. AI-related stocks have been volatile this summer on concerns that the AI boom may have inflated prices.[S1][S2]
In Europe, stock benchmarks moved higher as crude costs retreated. The FTSE 100 in London gained 0.4% following data indicating the British economy performed better than forecast during July. By contrast, Asian shares declined, with Japan's Nikkei 225 dropping 1.9% and South Korea's Kospi sliding 1.8%.[S1]
