Dow rises more than 300 points after inflation report, Nasdaq on track for best first half since 1983

What’s driving markets

The final trading day of the week, month and quarter is presenting a positive picture for U.S. stocks as the main indexes advance following the latest inflation report.

“Clearly today the market likes and is responding to the inflation data,” said Chris Fasciano, portfolio manager for Commonwealth Financial Network, in a phone interview Friday. “It continues to show softening inflation and that’s clearly what the Fed’s looking for,” he said.” I think investors are comfortable right now with a soft-landing scenario” for the economy.

On Friday, data showed U.S. inflation measured by the personal-consumption-expenditures price index eased to 3.8% in May on a 12-month basis, the slowest increase since April 2021.

The PCE price index edged up 0.1% on a month-over-month basis in May, while core prices, which exclude volatile food and energy products, increased by 0.3%. The government’s PCE inflation report was in line with economists’ expectations.

See: U.S. inflation slows, PCE shows, but price pressures still intense

The data added to an increasingly upbeat portrait of a U.S. economy, which has continued to expand despite the Fed’s aggressive tightening of monetary policy. Gross domestic product in the U.S. expanded 2% during the first quarter, much stronger than the previous 1.3% reading, data released on Thursday showed.

In other U.S. economic updates, the University of Michigan said Friday the final reading of its consumer-sentiment index for June improved to 64.4. That’s a four-month high.

Still, the PCE report showed consumer spending rose just 0.1% in May, slower than economists had anticipated.

The Federal Reserve has been raising interest rates since 2022 to cool the economy and tame inflation. Fed Chair Jerome Powell said earlier this week that he didn’t expect inflation in the U.S. to return to the central bank’s 2% target until 2025.

“Right now, the Fed’s job is not clear-cut,” said George Mateyo, the chief investment officer of Key Private Bank, in emailed commentary Friday. “While they may not be done with rake hikes, perhaps they don’t have much more work to do.”

The U.S. stock market has rallied this month, bringing the S&P 500 index’s gains so far this quarter to more than 8%, according to FactSet data, at last check. The S&P 500 has jumped around16% so far this year, while the tech-heavy Nasdaq has soared almost 32%, based on Friday afternoon trading levels.

Companies in focus

• Nike Inc.
  NKE,
  -2.73%
  shares fell after the retailer’s fourth-quarter profit came in below Wall Street expectations amid markdowns and weaker demand for sneakers and clothing

• Constellation Brands Inc.
  STZ,
  -0.08%
  slipped after posting better-than-expected fiscal first-quarter earnings on Friday, boosted by strength in its beer business where sales rose 11% due to strong growth for Modelo Especial, which recently replaced Bud Light as the bestselling beer in the U.S.

• Apple
  AAPL,
  +1.78%
  shares rose, valuing the company at around $3 trillion. Wall Street analysts have grown even more bullish on the iPhone maker as the company was initiated with a Buy rating at Citi. Analyst Atif Malik set a price target of $240 on the stock.

• Carnival Corp.
  CCL,
  +9.93%
  shares jumped after a broker upgrade, capping off what has been a strong month for cruise stocks.

––Jamie Chisholm and Gregory Robb contributed to this report