Stocks Finish Higher as Core PCE Prices Match Expectations

The S&P 500 Index ($SPX) (SPY) on Friday closed up +0.59%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.65%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.44%.  December E-mini S&P futures (ESZ25) rose +0.60%, and December E-mini Nasdaq futures (NQZ25) rose +0.44%.

Stock indexes settled higher on Friday.  The broader market garnered support from Friday's reports on consumer spending and core PCE inflation.  Friday's report on Aug personal spending rose more than expected at the strongest pace in five months.  Also, Friday's report on the Aug core PCE price index, the Fed's preferred gauge of inflation, came in right on expectations, which could allow the Fed to continue lowering interest rates.  However, gains in stocks were limited after US consumer sentiment unexpectedly fell to a 4-month low.

US semiconductor makers found support Friday after The Wall Street Journal reported that the Trump administration is considering a new plan to reduce the US's reliance on chips made overseas, aiming to spur domestic manufacturing and reshape global supply chains.

Pharmaceutical stocks rose Friday despite President Trump's plan to impose 100% tariffs on drug imports.  According to Jeffries, the plan appears to be a "win" for the pharmaceutical industry, as many major drug makers have a production presence in the US and have announced increased investment directly tied to local manufacturing. 

US Aug personal spending rose by +0.6% m/m, stronger than expectations of +0.5% m/m and the largest increase in 5 months.  Aug personal income rose +0.4% m/m, stronger than expectations of +0.3% m/m.

The US Aug core PCE price index, the Fed's preferred gauge of inflation, rose +0.2% m/m and +2.9% y/y, right on expectations.

The University of Michigan US Sep consumer sentiment index was unexpectedly revised lower to a 4-month low of 55.1, weaker than expectations of no change at 55.4.

The University of Michigan US Sep 1-year inflation expectations were revised lower to 4.7% from the previously reported 4.8%.  Also, the Sep 5-10 year inflation expectations were revised downward to 3.7% from the previously reported 3.9%.

Comments from Richmond Fed President Tom Barkin on Friday were slightly hawkish, as he noted that the uncertainty that had pervaded the economic outlook earlier in the year has started to lift for US companies, and he sees limited risk of further deterioration in employment and inflation.

A potential negative factor for market sentiment is the likelihood that the US government will shut down on October 1 if lawmakers fail to pass a spending bill by then.  The White House issued a memo late Wednesday that said a shutdown would trigger widespread dismissals of employees in government programs that don't align with President Trump's priorities.

Rising corporate earnings expectations are a bullish backdrop for stocks.  According to Bloomberg Intelligence, more than 22% of companies in the S&P 500 provided guidance for their Q3 earnings results that are expected to beat analysts' expectations, the highest in a year.  Also, S&P companies are expected to post +6.9% earnings growth in Q3, up from +6.7% as of the end of May. 

The markets are pricing in an 88% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29. 

Overseas stock markets on Friday settled mixed.  The Euro Stoxx 50 rallied to a 5-week high and closed up +1.01%.  China's Shanghai Composite closed down -0.65%.  Japan's Nikkei Stock 225 closed down -0.87%.

Interest Rates

December 10-year T-notes (ZNZ5) on Friday closed down -2 ticks.  The 10-year T-note yield rose +1.3 bp to 4.183%.  T-notes posted modest losses on Friday after US Aug personal spending rose more than expected at the strongest pace in 5 months.  Also, hawkish comments from Richmond Fed President Tom Barkin were bearish for T-notes when he said he sees limited risk of further deterioration of employment and inflation.  In addition, strength in stocks on Friday curbed safe-haven demand for T-notes.

Losses in T-notes were limited on Friday as inflation concerns eased after the August core PCE price index, the Fed's preferred gauge of inflation, came in right on expectations, and the University of Michigan's US September inflation expectations were revised lower.  Also, Friday's downward revision in the University of Michigan US Sep consumer sentiment index to a 4-month low was bullish for T-notes.

European government bond yields moved lower on Friday.  The 10-year German bund yield fell to a 1-week low of 2.728% and finished down -2.8 bp at 2.746%.  The 10-year UK gilt yield fell from a 3-week high of 4.768% and fell -1.1 bp to 4.746%.

The ECB Aug 1-year CPI expectations unexpectedly rose to 2.8% from 2.6% in July, stronger than expectations of a decline to 2.5%.  The ECB Aug 3-year CPI expectations were unchanged from July at 2.5%, stronger than expectations of a decline to 2.4%.

Swaps are discounting a 1% chance for a -25 bp rate cut by the ECB at its next policy meeting on October 30.

US Stock Movers

US chipmakers rallied on Friday after The Wall Street Journal reported that the Trump administration is weighing a new plan to reduce the US's reliance on chips made overseas.  GlobalFoundries (GFS) closed up by more than +7% and Intel (INTC) closed up more than +4%.  Also, Applied Materials (AMAT) closed up more than +2% and Texas Instruments (TXN) closed up more than +1%. 

Energy producers and energy service providers rallied Friday as the price of WTI crude oil rose more than +1% to a 1.75-month high.  Devon Energy (DVN) closed up more than +3% and Schlumberger (SLB) closed up more than +2%.  Also, Diamondback Energy (FANG), Haliburton (HAL), ConocoPhillips (COP), APA Corp (APA), Exxon Mobil (XOM), Marathon Petroleum (MPC), and Occidental Petroleum (OXY) closed up more than +1%.

Pharmaceutical stocks moved higher after Jeffries said that President Trump's plan to boost tariffs on the companies looks like a "win" for the pharmaceutical industry, as many major drug makers have some production presence in the US and have announced increased investment directly tied towards local manufacturing.  Eli Lilly (LLY) and Merck & Co. (MRK) closed up more than +1%, AbbVie (ABBV) closed up +0.90%, Pfizer (PFE) closed up +0.56%, and Amgen (AMGN) closed up +0.37%. 

Electronic Arts (EA) closed up more than +14% to lead gainers in the S&P 500 and Nasdaq 100 after the Wall Street Journal reported that the company is in talks to be taken private by a consortium led by Silver Lake Management and Saudi Arabia's Public Investment Fund.

Crinetics Pharmaceuticals (CRNX) closed up more than +27% after receiving FDA approval for its Palsonify medication to treat adults with acromegaly. 

Paccar (PCAR) closed up more than +5% after President Trump set a 25% tariff rate on heavy trucks made outside of the US. 

Mirion Technologies (MIR) closed up more than +10% after JPMorgan Chase initiated coverage on the stock with a recommendation of overweight with a price target of $28. 

Boeing (BA) closed up more than +3% to lead gainers in the Dow Jones Industrials after the Wall Street Journal reported that the FAA will ease restrictions on 737 MAX deliveries.

Concentrix (CNXC) closed down more than -13% after forecasting Q4 adjusted EPS of $2.85 to $2.96, well below the consensus of $3.30.

IREN Ltd (IREN) closed down more than -10% after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $24. 

RH (RH) closed down more than -4% after President Trump announced a 50% tariff on all imported kitchen cabinets, bathroom vanities, and associated products, starting October 1.

Costco Wholesale (COST) closed down more than -2% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q4 US comparable sales rose +5.1%, weaker than the consensus of +5.21%.

CarMax (KMX) closed down more than -1% after Evercore ISI downgraded the stock to in line from outperform. 

Warner Bros Discovery (WBD) closed down more than -1% after KeyBanc Capital Markets downgraded the stock to sector weight from overweight. 

Earnings Reports(9/29/2025)

Carnival Corp (CCL), IDT Corp (IDT), Jefferies Financial Group Inc (JEF), Lionsgate Studios Corp (LION), Progress Software Corp (PRGS), ReposiTrak Inc (TRAK), Vail Resorts Inc (MTN).