Stock Markets Rise on Positive Inflation Data and Economic Signals

The S&P 500 Index ($SPX) (SPY) closed up +1.59% on Friday, while the Dow Jones Industrials Index ($DOWI) (DIA) finished up +1.39%. The Nasdaq 100 Index ($IUXX) (QQQ) also recorded a gain, closing up +1.62%. March E-mini S&P futures (ESH25) are currently up +1.45%, and March E-mini Nasdaq futures (NQH25) are up +1.47%.

Friday’s trading saw stock indexes gain moderately after the release of the US January core PCE index, the Federal Reserve’s favored measure of inflation, which met expectations. The core PCE index rose +2.6% year-over-year, representing the smallest annual increase in almost four years. This development raised speculation about potential interest rate cuts by the Fed later this year. Additionally, the positive inflation news contributed to a drop in the 10-year Treasury note yield, reaching a 2.5-month low. A rebound in semiconductor stocks also helped the Nasdaq 100 recover from a recent low.

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Other economic indicators released on Friday presented a mixed outlook for stocks. Personal spending for January fell unexpectedly by -0.2%, contrasting with projections for a +0.2% increase, marking the steepest decline in nearly four years. On a more positive note, personal income rose by +0.9%, outperforming expectations of +0.4% and signaling the most robust increase in a year. Additionally, the MNI Chicago PMI for February rose to 45.5, up +6.0 points and surpassing estimates of 40.8.

Despite these gains, stocks experienced volatility in Friday afternoon trading, briefly retreating and dropping to 1.5-month lows. Geopolitical concerns contributed to this downturn, as a meeting between President Trump and Ukrainian President Zelensky ended in disputes, resulting in a stalled peace process regarding the Ukraine-Russian conflict.

The January core PCE index recorded a monthly increase of +0.3% and a yearly increase of +2.6%, again meeting expectations and reflecting the slowest annual growth rate in nearly four years.

New tariff threats from President Trump have added downward pressure on the market. On Thursday, the President announced that a proposed 25% tariff on Canada and Mexico would take effect on March 4, along with an additional 10% tariff on Chinese goods.

Currently, market expectations indicate a 7% probability of a -25 basis point rate cut at the next FOMC meeting scheduled for March 18-19.

Overseas markets felt the impact of these developments; the Euro Stoxx 50 dropped to a two-week low, closing down -0.16%. China’s Shanghai Composite Index fell to a 1.5-week low, down -1.98%. Japan’s Nikkei 225 sank to a 5.25-month low, finishing down -2.88%.

Interest Rates

March 10-year T-notes (ZNH25) saw an increase of +14.5 ticks, and the yield on 10-year T-notes fell -2.9 basis points to 4.231%. T-notes have risen due to robust support from rallies in European government bonds and the unexpected decline in US personal spending, alongside the favorable PCE index data. Additionally, concerns regarding President Trump’s fiscal and trade policies—which may hinder consumer spending—bolster demand for T-notes. Month-end buying by bond fund managers to balance portfolios is also supporting T-note prices.

European bond yields trended lower on Friday. The yield for 10-year German bunds dropped to a 2.5-week low of 2.369%, ultimately settling down -0.7 basis points at 2.406%. In the UK, the 10-year gilt yield decreased to a 2.5-week low of 4.460%, finishing down -3.0 basis points at 4.482%.

The ECB’s January one-year CPI expectations unexpectedly eased to +2.6%, while the three-year CPI expectations remained unchanged at +2.4%, which was better than anticipated. German retail sales for January increased by +0.2%, falling short of expectations that called for a +0.5% rise. The German February CPI (EU harmonized) rose +0.6% m/m and +2.8% y/y, exceeding expectations of +0.5% m/m and +2.7% y/y. Market insiders expect a 99% chance of a -25 basis point rate cut by the ECB at their policy meeting on March 6.

US Stock Movers

AES Corp (AES) was a standout performer, closing up over +11% after announcing Q4 adjusted EPS of 54 cents, well above the consensus of 35 cents. The company also provided a positive forecast for 2025 adjusted EPS of $2.10 to $2.26, exceeding expectations of $2.04.

The rebound in semiconductor stocks contributed to the overall market’s strength. Notable gainers included Marvell Technology (MRVL), which rose more than +4%, and Nvidia (NVDA) with a +3% increase. Other semiconductor stocks like Intel (INTC), Microchip Technology (MCHP), Analog Devices (ADI), and Texas Instruments (TXN) also experienced gains of more than +2%. Micron Technology (MU) and Qualcomm (QCOM) saw increases over +1% as well.

Additionally, Edison International (EIX) rose over +6% following its forecast of 2025 core EPS between $5.94 and $6.34, above the consensus of $5.70. Monster Beverage (MNST) surged more than +5% after reporting Q1 net sales of $1.81 billion, higher than the consensus of $1.80 billion. Rocket Cos. (RKT) gained over +9% as it reported Q4 adjusted revenue of $1.19 billion, exceeding the expected $1.15 billion.

Elastic NV (ESTC) closed up more than +14% after posting Q3 revenue of $382.1 million, beating the consensus of $368.9 million, and raised its full-year revenue guidance to between $1.47 billion and $1.48 billion, surpassing the prior forecast of $1.45 billion to $1.46 billion.

Vital Farms (VITL) gained over +7% following an upgrade from Stifel from hold to buy, with a price target set at $44. Entegris (ENTG) climbed more than +3% after S&P Dow Jones Indices announced it would replace Arcadium Lithium Plc in the S&P MidCap 400 before trading starts on March 6.

On the downside, Acadia Healthcare (ACHC) dropped over -25% after revising its full-year adjusted EBITDA forecast down to between $675 million and $725 million, below market expectations of $741.6 million. NetApp (NTAP) fell more than -15% after it cut its full-year adjusted EPS outlook to $7.17-$7.27 from a prior estimate of $7.20-$7.40, missing the consensus of $7.31. HP Inc (HPQ) decreased over -6% following a Q2 adjusted EPS forecast of 75 to 85 cents, which fell short of the expected 85 cents.

PDD Holdings (PDD) led declines in the Nasdaq 100, closing down more than -4% as US-listed Chinese stocks retreated post-announcement of the additional 10% tariff on Chinese goods. Dell Technologies (DELL) fell more than -4% after reporting Q4 total revenue of $23.93 billion, which came below the consensus of $24.65 billion.

Solventum (SOLV) closed down more than -4% after forecasting a 2025 free cash flow between $450 million and $550 million, below the consensus of $604.6 million. Walgreens Boots Alliance (WBA) declined over -4% after being downgraded by Deutsche Bank from hold to sell, with a price target of $9. EOG Resources (EOG) lost more than -2% as it reported Q4 revenue of $5.59 billion, which was below expectations of $5.66 billion.

Earnings Reports (3/3/2025): Fortrea Holdings Inc (FTRE), GitLab Inc (GTLB), Okta Inc (OKTA).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.