The Dow Jones Industrial Average and other major stock indexes experienced a significant rebound on Friday, rising nearly 400 points, or 0.9%, as investors reacted positively to a recent inflation report.
This surge came after a challenging week, where the Dow had faced a 10-day losing streak, culminating in a slight recovery on Thursday. The S&P 500 and Nasdaq also joined the rally, both gaining 0.8% in morning trading. The increased trading volume on the New York Stock Exchange and Nasdaq indicated a robust market sentiment, with advancing stocks outpacing decliners by a notable margin.
The catalyst for this market optimism was the Personal Consumption Expenditures (PCE) index, which rose by only 0.1% month-over-month, falling short of economists' expectations of a 0.2% increase. On an annual basis, the PCE index increased by 2.4%, slightly below the anticipated 2.5%. Core inflation figures also showed a modest rise of 0.1% monthly and 2.8% annually, compared to forecasts of 0.2% and 2.9%, respectively. This data helped investors momentarily set aside concerns regarding a looming partial government shutdown, which was exacerbated by the failure of a government spending bill backed by President-elect Donald Trump to pass in the House.
In the wake of the inflation data, various stocks exhibited mixed performances, particularly in the tech sector. Nvidia saw a recovery attempt, although it remained below its 50-day moving average. Conversely, shares of Trump Media and Technology plummeted following reports that the president-elect had transferred shares to a revocable trust, leading to a significant sell-off. FedEx initially soared over 20% after announcing its earnings, which exceeded expectations, but later relinquished most of those gains, closing down over 1%. The company also revealed plans to spin off its freight business, a move that may have contributed to the volatility in its stock price.
Carnival Corporation reported fourth-quarter results that met analyst expectations, with sales of $5.9 billion and earnings of 14 cents per share, surprising analysts who had predicted only 8 cents. This positive news led to a 3% increase in Carnival's stock, although it remains well past a profit zone. In stark contrast, Novo Nordisk, a leader in obesity drugs, faced a significant setback as its experimental drug CagriSema failed to meet its weight loss targets in a late-stage clinical trial, resulting in a more than 20% drop in its stock price. Meanwhile, rival Eli Lilly experienced a 4% surge, although it remained below its downward-sloping 50-day moving average.
The broader market sentiment reflected a cautious optimism, particularly among health care and finance stocks, which generally gained ground. However, technology and retail leaders struggled to keep pace with the overall market rally. Among the so-called "Magnificent Seven" stocks, Tesla managed to add a fraction to its value, reversing earlier losses, while Meta also saw a similar trend. In contrast, tech giants like Microsoft, Amazon, and Apple lagged behind, indicating a potential shift in investor focus.
Warren Buffett's Berkshire Hathaway saw a notable increase in its holding of Occidental Petroleum, which jumped nearly 5% following news that Buffett had acquired an additional 8.9 million shares. This move underscores Buffett's continued confidence in the oil sector, even as Occidental's shares remain below their recent highs. The market's reaction to these developments highlights the ongoing volatility and uncertainty that investors are navigating, particularly in light of the impending government shutdown and its potential implications for the economy.
As the trading day progressed, the market's resilience in the face of economic challenges was evident, with investors weighing the implications of inflation data against the backdrop of political uncertainty. The interplay between economic indicators and market sentiment will continue to shape trading strategies as investors seek to position themselves for potential opportunities in the evolving landscape.