US equity indexes managed to achieve slight gains this week, buoyed by data indicating stable economic growth and discussions surrounding additional stimulus measures from China, which helped to mitigate the effects of mixed inflation data. The Dow Jones Industrial Average concluded the week at 42,313.00, marking an increase from 42,063.36 the week prior.
Similarly, the Nasdaq Composite finished at 18,119.59, up from 17,948.32, while the S&P 500 ended at 5,738.17, slightly higher than its previous close of 5,702.55. Notably, the basic materials sector, encompassing industries such as aluminum, building materials, and copper, led the charts for US sectors. In a significant statement from Beijing on Thursday, the Politburo committed to undertaking the "necessary fiscal spending" to achieve the annual objective of 5% GDP growth and to bolster property markets following recent monetary easing actions by the People's Bank of China. In the United States, the preliminary estimates for Q2 GDP growth remained unchanged from prior evaluations, exceeding expectations.
Additionally, initial jobless claims saw an unexpected decline for the week ending September 21, with the four-week moving average also witnessing a downward trajectory. On Friday, it was reported that the core personal consumption expenditures (PCE) price index for August showed a slowdown compared to the previous month, while the year-over-year core PCE registered its first acceleration since January 2023.
John Choong, head of equities and markets at Investors Edge, attributed this deceleration to falling energy prices and deflationary pressures from goods. Despite the supportive headline for the Federal Reserve's recent 50 basis point interest rate cut, economist Lindsey Piegza from Stifel noted that a slight increase in core after a month of stagnant movement, coupled with a lack of further improvements in core Consumer Price Index (CPI) and core Producer Price Index (PPI) suggests persisting inflationary risks. Following the release of the PCE data, the probability of a 50 basis point cut in interest rates scheduled for November rose to 54.8%, up from 49.3% the previous day, as indicated by the FedWatch Tool on Friday.
Conversely, there remains a 45.2% likelihood of opting for a smaller 25 basis-point reduction..