Stock Market Today: Stocks Sizzle on Hopes for a More Dovish Fed

Markets ended the week on a positive note Friday, finishing sharply higher after some economic data raised the possibility of a slower pace of rate hikes from the Federal Reserve. 

The blue-chip Dow Jones Industrial Average soared 2.6% to finish at 32,861, while the broader S&P 500 jumped 2.5% at 3,901. The tech-heavy Nasdaq Composite vaulted 2.9% to end at 11,102. 

Friday's session made for an upbeat end to a tumultuous week of mixed trading driven by disappointing quarterly reports from a slew of the biggest technology companies. On Friday, it was Amazon.com's (AMZN, -6.8%) turn to take a dive, as shares tumbled after the e-commerce and cloud-computing giant gave a downbeat revenue forecast for the holiday shopping season. Google parent Alphabet (GOOGL), Facebook parent Meta Platforms (META) and Microsoft (MSFT) all delivered discouraging results earlier in the week. 

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But Friday's action was dominated by a better-than-expected reading on inflation. The core Personal Consumption Expenditure Index, which is the Fed’s preferred measure of inflation, gained 0.5% month over month in September. That was just below economists' expectations, and fueled hope that the central bank could slow down its pace of interest rate increases.

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The Best Healthcare Stocks to Buy

A slower pace of inflation is to be expected if the economy really is set for a slowdown, and that only reinforces the case for equities that hold up well in a down market. Although the initial reading on third-quarter gross domestic product came in at a better-than-expected 2.6% annual rate – and rebounded after two consecutive quarters of contraction – experts say the underlying data reveal an increasingly weak economy. If that does turn out to be the case, investors would be well-advised to adopt strategies that work in a bear market. Adding reliable and rising dividend payers to a portfolio can certainly help folks' returns hold up in down markets, especially when those names are concentrated in defensive sectors. The best consumer staples stocks are a good place to start. 

But few sectors are as dividend-rich and defensive as healthcare. The driving narrative of the past few years has been the industry's response to COVID-19, and some of those tailwinds are beginning to abate. We've found several healthcare stocks set to reach new heights as the pandemic continues to ebb.