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.
Dexcom spirals on top-line miss, dreary forecast
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.
