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- Stocks closed at record highs on Friday as September inflation signaled more Fed rate cuts to come.
- Consumer prices rose 3% year-over-year, below economists' expectations.
- With rate cuts on the horizon, "it's hard to see an interruption of this year's bull market," a CIO said.
US stocks shot up to fresh all-time highs to end the week, boosted by a late September inflation report that showed inflation accelerated less than expected.
Consumer prices rose 3% in September, the Bureau of Labor Statistics said on Friday morning, slightly under economists' expectations of 3.1%.
It's the first big economic data point investors have gotten since the government shut down at the beginning of this month, and the White House said on Friday that they shouldn't expect the October inflation data to be released on time in November.
The S&P 500 topped 6,800 for the first time ever before paring the gain, while the Dow Jones Industrial Average gained nearly 500 points to notch its own all-time high.
Here's where major stock market indexes stood at the 24 p.m. ET closing bell on Friday:
- S&P 500: 6,791.69, up 0.79%
- Dow Jones Industrial Average: 47,207.12, up 1% (+472.51 points)
- Nasdaq Composite: 23,204.87, up 1.1%
While the inflation rate remains above the Fed's 2% target, a 3% level indicates that tariffs are not leaking into consumer prices to the degree economists had feared.
"As odd as it may seem, the Fed will be happy with inflation staying around 3% for the next couple of months. The tariff passthrough generally remains muted, as the focus shifts squarely to a weakening labor market," said Olu Sonola, head of US economic research at Fitch Ratings.
Although the market did not get a jobs report for September, various indicators show that the labor market is cooling. Statistics from other sources, including ADP and outplacement firms, show that payroll growth is slowing and firing plans have risen at US companies.
Chris Zaccarelli, chief investment officer at Northlight Asset Management, said the latest economic data suggests that the bull market can continue for now.
"We understand that valuations are high and there are risks in the market, but with the Fed cutting rates — and this report does nothing to stop them from a 25-bps cut next week — and corporate profits continuing to increase, it's hard to see an interruption of this year's bull market."
"Next year will bring new challenges," he continued, "but we wouldn't advise getting in the way of the upward trend between now and year-end."
