The latest economic release out of the US added to signs that the Fed may cut rates sooner than thought
Stocks ended mostly higher on Wall Street Thursday to see the biggest monthly gain in more than a year. The S&P 500 rose 0.4%, the Dow Jones jumped 1.5%, while the tech-heavy Nasdaq Composite bucked the trend to fall 0.2%. Equities were buoyed by the release of the PCE index, which showed that inflation cooled to its lowest levels since 2021. The release added to signs that the Fed may cut rates sooner than thought. In individual stocks, shares of Salesforce rallied nearly 10% after the company reported better-than-expected results and raised its outlook. For the week, the S&P 500 is up 0.2%, the Dow is up 1.6%, and the Nasdaq is down 0.2%.
In Asia, however, stocks sank on Friday amid some profit-taking after strong gains in November. Also, investors turned more cautious with focus now turning to an upcoming address from Fed Chair Powell as markets await more cues on interest rates. Besides, market participants continued to digest the recent report from China where the manufacturing activity survey showed persistent weakness in the sector. Still, China’s Shanghai Composite managed to erase early losses to turn slightly positive on the session, while Hong Kong’s Hang Seng index fell 0.2%. In Australia, ASX 200 fell 0.2% after PMI data showed a sustained decline in manufacturing activity.
Meanwhile, the US dollar surged on Thursday along with Treasury yields, cheering PCE data as the PCE report gave no enough evidence of inflation coming down in the eyes of the Fed. Also, the greenback was supported by the fact that Fed officials are not ruling out further policy tightening, hinting at a still hawkish stance. Against this backdrop, the USD index rallied above the 103.00 handle to find resistance around 103.60 before retreating partially on Friday. In the immediate term, the dollar may refrain from another jump, with the overall selling pressure persisting.
In other markets, gold prices stay elevated despite a local retreat seen during the previous session. Earlier in the week, the XAUUSD pair notched late-April highs just above the $2,050 zone amid dollar weakness as traders continued to bet on an earlier rate cut by the Fed. Since then, the bullion has retreated marginally to derive support in the $2,030 area. On Friday, the precious metal regained the upside bias, finishing the third bullish week in a row. Should the upside pressure persist after the weekend, gold may target all-time highs seen around $2,075 in August 2020.