Stocks notched modest gains Friday after the latest inflation data did little to sway market expectations for a rate cut at next week's Fed meeting. The main indexes managed to carve out weekly gains, too, kicking off a historically strong month on a positive note.
At the close, the blue-chip Dow Jones Industrial Average gained 0.2% at 47,954, the broader S&P 500 rose 0.2% to 6,870, and the tech-heavy Nasdaq Composite added 0.3% to 23,578.
Ahead of the open, the Bureau of Economic Analysis said that the Personal Consumption Expenditures (PCE) Price Index – the Fed's preferred measure of inflation – rose 0.3% from August to September and was 2.8% higher than the same month one year ago.
Core PCE, which excludes volatile food and energy prices, was up 0.2% month over month and 2.8% year over year.
Both the headline and core inflation figures matched economists' forecasts, while the 0.4% rise in personal income came in slightly above expectations. However, the 0.3% increase in personal spending was a bit lower than anticipated.
The data, which was delayed due to the record-long government shutdown, is a bit stale, but confirms "the U.S. consumer and inflation were losing momentum at the end of the third quarter, before the government shutdown became an added headwind contributing to a year-end economic soft patch," says Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute.
But Timmerman notes that "more timely data" on consumer sentiment from the University of Michigan "should bode well for the all-important holiday shopping season."
Specifically, the University of Michigan this morning said consumer sentiment rose 2.3 index points in early December, with the increase primarily coming from younger consumers.
"Consumers see modest improvements from November on a few dimensions," said Surveys of Consumers Director Joanne Hsu, though she cautioned that "the overall tenor of views is broadly somber, as consumers continue to cite the burden of high prices."
Today's economic reports had little impact on rate-cut expectations. According to CME Group FedWatch, futures traders are pricing in an 87% chance the Fed will lower the federal funds rate by a quarter-percentage point next Wednesday afternoon, about the same odds as yesterday.
Netflix wins the Warner Bros. bidding war
In single-stock news, Netflix (NFLX, -2.9%) agreed to buy Warner Bros. Discovery's (WBD, +6.3%) film studio and streaming services in a cash-and-stock deal valued at $72 billion, or $27.75 per WBD share. It also said it will pay a $5.8 billion breakup fee if the deal is not approved.
Netflix won out over Paramount Skydance (PSKY, -9.8%) and Comcast (CMSCA, +0.4%), which were also interested in taking over the assets once Warner Bros. spins off its cable network business next year.
"I know some of you are surprised that we're making this acquisition, and I certainly understand why," said Netflix co-CEO Ted Sarandos on a call with analysts. "Over the years, we have been known to be builders, not buyers."
Sarandos added that while Netflix already has "incredible" content and "a great business model," the acquisition "is a rare opportunity that's going to help us achieve our mission to entertain the world and to bring people together through great stories."
While some media reports suggested an uphill regulatory battle for the deal, Sarandos said he's "really confident" the company will "get all the necessary approvals we need."
WBD is expected to spin off its cable assets in Q3 2026, and estimates are for the Netflix deal to close in the next 12 to 18 months.
Ulta tops S&P 500 after earnings
Elsewhere, Ulta Beauty (ULTA) surged 12.7% – making it the best S&P 500 stock Friday – after the cosmetics retailer's beat-and-raise quarter.
The company also saw notable strength in its e-commerce segment and posted higher-than-expected same-store sales growth of 6.3% for its fiscal third quarter.
"The company quelled fears around a near-term sales slowdown," says UBS Global Research analyst Michael Lasser. "It noted it has seen solid Black Friday and Cyber Monday trends so far. It has continued to gain market share despite driving more efficiencies with promotions. So, we think Ulta left some upside on the table with its Q4 guide."
Lasser reiterated his Buy rating on the consumer discretionary stock and lifted his price target from $680 to a Street-high $690, representing implied upside of 15% to current levels.
