Stock Market Today: Dow Hits New High After Upbeat PCE Data

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A solid week for stocks ended on a comparatively quiet note as investors took in another encouraging reading on inflation. With the pace of rising prices seemingly under control, the focus now shifts to the labor market and next Friday's release of the September jobs report.

Today, though, it was an inflation update that Wall Street was centered on. According to the Bureau of Economic Analysis, the Personal Consumption and Expenditures (PCE) Price Index increased by 0.1% in August from the month prior and was up 2.2% on an annual basis. Both figures were lower than what was seen in July.

Core PCE, which excludes volatile food and energy prices, increased 0.1% month over month and 2.7% year over year. While the monthly rise was slower than July's 0.2% gain, the annual increase was slightly faster.

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"The August PCE report supports the Fed's decision to go big on September 18, although the core year over year at 2.7% suggests that another round of 50 basis points needs to come under careful scrutiny unless the labor market suggests weakness," says Quincy Krosby, chief global strategist at LPL Financial.

Krosby adds that while the Fed "cannot declare complete victory on inflation," today's PCE data "underscores that overall inflation continues to move decisively in the right direction."

Costco falls after revenue miss

In single-stock news, Costco Wholesale (COST) stock fell 1.8% after the membership warehouse club's fiscal fourth-quarter revenue fell short of estimates. Still, the company beat on the bottom line.

"We look very favorably upon COST's long-term prospects," says Oppenheimer analyst Rupesh Parikh (Outperform, the equivalent of Buy). Among the many reasons he's bullish on the consumer staples stock are Costco's unique and improving consumer value proposition, open-ended worldwide growth prospects, and its leading competitive position that could drive share gains.

The analyst recommends clients "take advantage" of any post-earnings profit-taking on COST.

Super Micro bounces ahead of stock split

Elsewhere, Super Micro Computer (SMCI) stock rose 4.3% ahead of next week's 10-for-1 stock split. While stock splits are the equivalent of making change – 10 one-dollar bills for one $10 bill, for instance – it will bring SMCI's share price down to about $42 from its current perch near $420.

Shares have shed 65% since their mid-March peak, but Needham analyst Quinn Bolton remains bullish on the tech stock. "We view Super Micro as a significant beneficiary from growing investment in AI infrastructure and forecast a revenue compound annual growth rate (CAGR) in excess of 55% from fiscal 2021 to fiscal 2026," he wrote in a recent note.

Alibaba headed toward its best month in nearly two years

One of the most notable movers today was Alibaba Group Holding (BABA) stock, which added 2.2%. This extends the e-commerce giant's impressive September rally, with shares up 28.7% for the month to date, and puts BABA on pace for its best one-month return since December 2022 (+33.8%).

BABA was buoyed earlier this month by news it released open-source artificial intelligence (AI) models, while recently announced stimulus measures from the People's Bank of China also created tailwinds.

As for the main indexes, the Dow Jones Industrial Average gained 0.3% to 42,313 – a new record closing high – on strength in oil major Chevron (CVX, +2.5%) and insurance giant UnitedHealth Group (UNH, +1.2%). The S&P 500 slipped 0.1% to 5,738, while the Nasdaq Composite fell 0.4% to 18,119.

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With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.

With contributions from