Stocks Rise, Meta Metaverse, Salesforce Bounce
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Stocks Close Higher as Inflation Data Boosts Rate Cut Hopes
Stocks eked out gains Friday and closed the week higher after the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, indicated a potential interest rate cut next week. The S&P 500 rose 0.3% for the week, while the Nasdaq added nearly 1%. The Dow Jones Industrial Average gained roughly 0.5%. Both the S&P 500 and Nasdaq logged back-to-back weekly gains.
The positive movement followed the release of the September PCE report, which showed a cooler-than-expected year-over-year increase in the core rate (excluding food and energy prices). This report, delayed due to the recent government shutdown, provided welcome data to a market anticipating the Federal Reserve’s two-day policymaking meeting on Tuesday and wednesday.
Inflation Data and the Fed’s Outlook
The core PCE price index increased 3.7% year-over-year in September, according to the Bureau of Economic Analysis (Bureau of Economic Analysis, October 27, 2023). this figure was lower than the 3.9% increase recorded in August. The overall PCE price index rose 3.4% year-over-year.
New York Federal Reserve President John Williams recently suggested the possibility of a central bank rate cut, sparking a market rebound. As then, the S&P 500 has risen approximately 5% and is nearing it’s record-high close of 6,890 on October 28.
Key Stock Performances
Several companies experienced notable performance this week:
- Meta Platforms: Shares advanced 4% after reports indicated the company plans to cut metaverse spending by up to 30% (Bloomberg, November 2, 2023).
- Other Tech Stocks: Tech stocks generally benefited from the lower inflation expectations, as lower rates tend to favor growth stocks.
Analysts suggest Meta’s potential shift in focus towards more readily monetizable technologies, such as smart glasses and artificial intelligence, is a positive growth.The company has faced scrutiny over its substantial investments in the metaverse, which have not yet yielded notable returns.
Impact of Government Shutdown on Data Release
The release of the September PCE report was delayed due to the recent government shutdown. This created a period of data scarcity for investors, making the