Dow up 0.55%... Highest level in a day
S&P 500 up 1.01%, Nasdaq up 1.13%
The New York stock market closed higher on the last trading day of August, which had been marked by high volatility.
The July Personal Consumption Expenditures (PCE) price index, a preferred inflation gauge of the U.S. Federal Reserve (Fed), indicated a stable inflation trend, strengthening expectations that the rate-cutting cycle will begin in September, which helped the market regain stability and surge.
On the 30th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 41,563.08, up 228.03 points (0.55%) from the previous session.
The large-cap benchmark Standard & Poor's (S&P) 500 index rose 56.44 points (1.01%) to 5,648.40, and the tech-heavy Nasdaq Composite index gained 197.19 points (1.13%) to 17,713.62. The Russell 2000 index, composed of small- and mid-cap stocks, also rose 0.67%.
The Dow set a new all-time closing high after just one day. The S&P 500 recorded a monthly gain of 2.3%, marking its fourth consecutive month of gains. Strong performances in consumer discretionary, real estate, and healthcare sectors fueled the continuous upward momentum. During the same period, the Dow rose 1.8%, and the Nasdaq increased 0.7%.
Earlier this month, the three major indexes experienced heightened volatility as fears of a U.S.-originated recession spread across global financial markets, triggering a selling storm that caused the S&P 500 to plunge as much as 7.3%, the Dow 5.4%, and the Nasdaq 10.7%.
On this day, the market responded positively to the July PCE report, which suggested that inflation is steadily moving toward the Fed's 2% target. According to the U.S. Department of Commerce, the July PCE rose 0.2% month-over-month, in line with market expectations. The year-over-year increase was 2.5%, slightly below the expected 2.6%. The core PCE, which excludes volatile items such as energy and food, also rose 0.2% month-over-month, matching forecasts. Year-over-year, core PCE increased 2.6%, below the expected 2.7%. The core PCE is the Fed's most closely watched inflation gauge and can decisively influence the magnitude and frequency of rate cuts within the year.
Michael Green, Chief Strategist at Simplify Asset Management, said, "The market reacted as if everything was positive," adding, "With increasing signs of a soft landing for the economy, the Fed has less justification to aggressively cut rates."
Although expectations for big rate cuts have diminished, the market focused on securing stability. On this day, shares of traditional semiconductor company Intel surged 9.49% from the previous close. Intel's stock jumped to record levels following news that it is discussing splitting its product design and manufacturing businesses and scrapping a manufacturing facility expansion project to improve earnings and boost its stock price.
China's largest e-commerce company Alibaba rose 2.86% after announcing that Chinese authorities have ended an antitrust investigation that lasted over three years. Semiconductor design firm Marvell Technology saw its stock jump 9.16% after reporting second-quarter data center sales nearly doubled, surpassing market expectations.
Generative AI-based software company Elastic NV's shares plunged 26.46% after posting earnings below market expectations. Ulta Beauty, a large cosmetics retail chain that recently attracted attention due to Warren Buffett's investment, fell 4.01% after reporting weak earnings and lowering its annual guidance.
Nvidia, which had retreated sharply after releasing its second-quarter earnings on the 28th, rebounded 1.51% to close at $119.37. Tesla (3.80%) and Amazon (3.71%), part of the large tech group known as the "Magnificent 7," posted gains in the 3% range, while Microsoft, Alphabet (Google's parent company), and Meta (Facebook's parent company) also closed higher. Only Apple slipped 0.34% but maintained its position as the largest market cap company.
All 11 sectors comprising the S&P 500 rose on this day. Notably, consumer discretionary (1.92%), industrials (1.11%), technology (1.06%), and materials (1.02%) sectors each gained more than 1%.
According to the FedWatch tool by CME Group, as of the afternoon of this day, the probability of the Fed cutting rates by 25 basis points in September was priced at 68.5%, while the chance of a 50 basis point cut was 31.5%. The likelihood of a 25 basis point cut increased by 2.5 percentage points from the previous day. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) fell 0.65 points (4.15%) to 15.00 compared to the previous session.
The New York stock and bond markets will be closed on the next trading day, September 2, in observance of Labor Day, a federal holiday. Trading for September will resume on the following day, September 3.
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