Stocks shot out of the gate Friday and kept climbing into the close as market participants cheered a tame inflation reading that all but confirmed a rate cut at next week's Fed meeting. A round of well-received earnings also lifted sentiment ahead of a busy week of corporate reports.
At the close, the Dow Jones Industrial Average was up 1.0% at 47,207, the S&P 500 was 0.8% higher at 6,791, and the Nasdaq Composite had gained 1.2% to 23,204 – new record highs for all three indexes.
Ahead of the opening bell, data from the Bureau of Labor Statistics showed the Consumer Price Index (CPI) was up 0.3% month over month in September and 3.0% year over year – slower than economists expected.
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Core CPI, which excludes volatile food and energy prices, also came in below forecasts.
"The cooler-than-expected CPI confirms what we've seen overall from private data during the government shutdown – little indication that inflation is surging or that the labor market is falling off a cliff," says Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. "For a Fed focused on prudent 'risk management,' that should translate into another rate cut next week, and likely more to follow."
Indeed, according to CME Group FedWatch, futures traders are currently pricing in a 97% chance the central bank will lower the federal funds rate by a quarter-percentage point next Wednesday afternoon. Odds of another rate cut in December have risen to 92% from 73% one month ago.
While delayed from its original reporting date, the BLS released the September CPI today so that the Social Security Administration could calculate the cost-of-living adjustment (COLA) for 2026. But with data collection services still suspended, it's unclear when we'll see the next CPI report.
IBM scores a key quantum-computing win
In single-stock news, International Business Machines (IBM) jumped 7.9% – making it the best Dow Jones stock today – after a Reuters report indicated the tech giant can use Advanced Micro Devices (AMD, +7.6%) chips to run a quantum computing error correction algorithm.
In August, IBM and AMD said they are working together to develop next-generation computers that are capable of solving complex tasks.
And according to Reuters, the ability to use AMD chips to correct quantum-computing errors marks a major step "toward commercializing super-powerful computers."
Quantum computing stocks were in focus on Thursday amid reports that the Trump administration is considering taking a stake in the tech firms. Those media reports were later rebuffed by Commerce Secretary Howard Lutnick.
Ford Motor gains after earnings
Elsewhere on Wall Street, Ford Motor (F) rose 12.2% after the automaker reported higher-than-expected third-quarter results.
"Ford results came ahead of both our and consensus estimates on the back of strong performance in Ford Blue and Pro," says BofA Securities analyst Federico Merendi.
And while the company's guidance drew a lot of attention – Ford lowered its full-year forecast due to the impact from a supplier fire – Merendi acknowledges that "the bottom line is that Ford's business is performing $1 billion ahead of assumptions provided in Q4 2024."
Procter & Gamble (PG, +0.9%), Comfort Systems (FIX, +19.0%) and General Dynamics (GD, +2.7%) all found themselves higher after earnings, as well.
Deckers slumps on soft outlook
Deckers Outdoor (DECK), on the other hand, slumped 15.2% as the shoemaker gave soft full-year sales guidance for its popular Hoka and UGG brands.
"U.S. consumers are beginning to see some price increases," said Deckers Chief Financial Officer Steven Fasching in the company's earnings call. "It is impacting their purchase behavior within the consumer discretionary space," which prompted "a little bit of a reduction" in its outlook.
UBS Global Research analyst Jay Sole doesn't seem too concerned. He reiterated a Buy rating on the consumer discretionary stock, saying he sees "a very good opportunity to buy shares in a growth company significantly undervalued by the market."
Next week's earnings calendar will be a busy one, too, with Alphabet (GOOGL), Amazon.com (AMZN) and Apple (AAPL) among the most notable names reporting.
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