In an impressive display of market resilience, U.S. equity indexes experienced significant gains after midday on Friday, spurred by signs of easing inflation and robust quarterly earnings reports. The Nasdaq composite registered an increase of 1.1%, closing at 17,378.1, while the S&P 500 climbed 1.3% to settle at 5,468.2.
The Dow Jones Industrial Average took the lead with a remarkable ascent of 1.8%, finishing the day at 40,657.3. Throughout the trading session, all sectors saw positive movement, particularly in industrials, financials, and materials, which emerged as the top gainers. Inflation data revealed that the annual headline personal consumption expenditures (PCE) price index slightly eased to 2.5% in June, down from 2.6% in May, although it remained above Wall Street's prediction of 2.4%.
Notably, the Federal Reserve’s preferred core inflation measure, which excludes volatile food and energy prices, held steady at 2.6%, aligning closely with the consensus estimate of 2.5%. Month-over-month figures showed sequential inflation growth of 0.1% last month, a modest increase from the flat reading in May, while the core PCE rose 0.2% compared to the previous month’s 0.1%.
These inflation metrics fell in line with market expectations and contributed to positive market sentiment. On the bond market front, most Treasury yields saw declines, with the 10-year yield dipping by five basis points to 4.20%, and the two-year rate retreating by 5.4 basis points to 4.39%. This trend in yields highlighted investor confidence in the market's outlook as inflation fears appeared to moderate. In corporate news, 3M Company ($MMM) took a notable step by raising the lower end of its full-year adjusted earnings guidance after reporting second-quarter results that surpassed market expectations.
This positive news propelled its shares upward, soaring by 19% intraday, making it the top performer on both the S&P 500 and the Dow. Meanwhile, Bank of America Securities made headlines by upgrading Mohawk Industries ($MHK) from an underperform rating to a buy, simultaneously adjusting its price target to $177 from a previous $120.
The company delivered a surprise increase in second-quarter earnings and provided an optimistic guidance for the third quarter that exceeded analyst forecasts. Following this upgrade, Mohawk's shares surged by 18% intraday, marking the second-highest return on the S&P 500 for the day. In stark contrast, DexCom ($DXCM) experienced a significant downturn, with shares plummeting 41% intraday—the most substantial decline observed on both the S&P 500 and the Nasdaq.
The drop followed the company’s announcement of reduced revenue guidance for 2024, leading to a sharp sell-off by investors concerned about its future performance. On the commodities front, West Texas Intermediate (WTI) crude oil saw a decline of 1.4%, settling at $77.21 per barrel, as market sentiments fluctuated amidst broader economic developments. Overall, this day of trading reflects a market landscape driven by strong earnings, moderated inflation, and strategic corporate maneuvers, positioning investors for potential growth going forward..