(Bloomberg) — US stocks posted modest gains after latest economic data highlighted a cooling economy and cemented bets for further rate cuts by the Federal Reserve. Treasuries rallied.
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The S&P 500 rose 0.2% after the underlying index hit its 42nd closing high this year. The Nasdaq 100 was little changed. The dollar declined. The 10-year US Treasury yields fell to around 3.77%.
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The Fed’s preferred gauge of underlying US inflation rose mildly in August. The core metric, which excludes volatile food and energy prices, was up 0.1% from July. It ticked 2.7% higher from a year ago, in-line with estimates. Inflation-adjusted consumer spending climbed 0.1%.
After the data, the market is still pricing in a split chance between a quarter point and half point cut at the Fed’s next meeting. Economists now see inflation reaching the US central bank’s 2% target next year.
“Add today’s PCE price index to the list of economic data landing in a sweet spot,” said Chris Larkin, managing director, trading and investing at E*Trade. “Inflation continues to keep its head down, and while economic growth may be slowing, there’s no indication it’s falling off a cliff.”
Damian McIntyre, a portfolio manager at Federated Hermes, said while a soft landing for the economy is never guaranteed, investors should find solace in the strength of recent economic data.
“Today’s inflation print confirms what Jerome Powell told us last week: inflation is falling, the consumer is strong, and the labor market remains resilient,” he said.
China’s daily stimulus announcements have also stoked risk appetite across markets this week.
“The data’s saying soft landing — you have to respect the data — but the forward-looking indicators are flagging warning signs,” said Andrew Pease, global head of investment strategy at Russell Investments Ltd. “The descent into a soft landing will always look the same as the start of a recession. And you won’t know till after you’ve got…
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