US stocks staged a sharp rebound on Friday, snapping a three-day streak of losses. Encouraging inflation data stoked optimism that the Federal Reserve can cut interest rates in September. US stocks rebounded Friday, helping reverse a streak of losses that dominated most of this week.
With investor confidence starting to waver in the tech-stock bull run, rotations out of the mega-cap sector sent indexes on a three-day decline. On Wednesday, the tech-heavy Nasdaq 100 suffered its worst day since 2022, dropping 3.6% .
That changed Friday, as encouraging inflation data injected new life into the rally. June's personal consumption expenditures index aligned with forecasts, boosting investor certainty that interest rates could soon come down. Headline PCE rose 0.
2% from May and 2.6% year-to-year. "Next week we expect [Fed Chair Jerome] Powell to set the table for future rate cuts, speaking confidently about progress bringing inflation down.
Today's PCE report supports this," said David Donabedian, chief investment officer of CIBC Private Wealth. "While we don't think he will use the word 'imminent,' we do think he will leave the impression that a September rate cut is likely." According to the CME FedWatch Tool , the market no longer expects the Federal Reserve to keep rates steady in September.
Instead, investors indicated 87.7% odds of one cut that month. The market also forecasts high chances that the Fed will slash rates by up to 75 basis points through December.
Here's where U.