Wall Street hits record highs as inflation pressures ease

NEW YORK (AP) — Wall Street rose to records after an update said U.S. households are feeling a bit less pain from inflation than feared. The S&P 500 climbed 0.8% Friday and topped its prior all-time high set earlier this month.

The Dow Jones Industrial Average jumped 1%, and the Nasdaq composite rallied 1.1%. Both also set records. The inflation data could clear the way for the Federal Reserve to keep cutting interest rates to help the slowing job market. A strong earnings report from Ford Motor and continued gains for AI stars also helped to drive stocks higher.

The data on inflation are encouraging because they could mean less pain for lower- and middle-income households struggling with still-high monthly price increases. Even more importantly for Wall Street, it could also clear the way for the Federal Reserve to keep cutting interest rates in hopes of giving a boost to the slowing job market.

The Fed just cut its main interest rate last month for the first time this year, but it’s been hesitant to promise more relief because lower rates can make inflation worse, beyond goosing the economy and prices for investments. Following the inflation report, traders upped bets to a near certainty that the Fed will cut rates at its next two meetings, including one next week.

“Right now, Fed officials are more concerned about the labor market than about inflation,” according to Brian Jacobsen, chief economist at Annex Wealth Management. “Without any evidence to the contrary, there’s nothing to really change their minds about cutting.”

Stocks have been shaky in recent weeks, following a 35% rally in the S&P 500 from its April low. Critics have argued that stocks became too expensive after their prices rose much faster than corporate profits. Worries also flared over potentially bad loans banks made after a period of calm that may have encouraged excessive risk-taking. And President Donald Trump rattled markets after threatening much higher tariffs on China, the world’s second-largest economy.

But stocks have rebounded each time, only to push higher. Banks have characterized the industry’s hiccups as just a collection of one-offs, while Trump is set to meet China’s leader, Xi Jinping, at a conference next week.

And most big U.S. companies are reporting stronger profits for the latest quarter than analysts expected, as is usually the case.

Ford Motor revved 12.8% higher to help lead the market Friday after the automaker topped analysts’ expectations for profit in the latest quarter. The company said its business is running at the high end of the financial performance forecast it gave in February.

Intel added 0.6% after reporting profit for the latest quarter that blew past analysts’ expectations. CEO Lip-Bu Tan credited the artificial-intelligence boom with “accelerating demand for compute and creating attractive opportunities.”

Google’s parent company climbed 3.1% after Anthropic announced an expansion worth tens of billions of dollars, where it would increase its usage of Google Cloud technologies for its AI chatbot, Claude. Alphabet was one of the strongest forces lifting the S&P 500, along with other AI beneficiaries like Nvidia.

Procter & Gamble’s profit beat analysts’ forecasts, despite what CEO Jon Moeller called “a challenging consumer and geopolitical environment,” and the stock of the company behind the Charmin, Oral-B and Pampers brands rose 1.2%.

They helped offset a drop in Newmont Mining, which fell 4.6% even though it also reported stronger-than-expected profit.

The miner’s stock came into the day with a stunning gain of nearly 139% for the year so far, after benefiting from the surging price of gold. But gold’s run has stalled recently. No investment’s price goes up forever, and criticism had been growing that gold’s price had gone too far, too fast after it shot up even more than the U.S. stock market.

Many of the same factors that drew buyers to gold this year remain, including concerns about the mountains of debt that the U.S. and other governments worldwide are amassing. The U.S. government’s gross national debt topped $38 trillion this week, and the worry is that a continued acceleration will only worsen inflation.

In global stock markets, indexes mostly rose across Europe and Asia. South Korea’s Kospi jumped 2.5%, and Japan’s Nikkei 225 rallied 1.4% for two of the world’s biggest moves.
In the bond market, Treasury yields held relatively steady, as the inflation data merely solidified already high expectations of upcoming Fed rate cuts. The yield on the 10-year Treasury slipped to 3.99% from 4.01% late Thursday.

A report from the University of Michigan also said expectations for inflation among U.S. consumers remains mixed. Such numbers are important because expectations for high inflation can encourage behavior that pushes inflation even higher, creating a vicious cycle.
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AP Writers Teresa Cerojano and Matt Ott contributed.