Wall Street rallied on Friday, pushing the S&P 500 up 0.86% to 7,656.98 points as accelerating U.S. consumer prices in August solidified expectations that the Federal Reserve will raise interest rates next week to combat persistent inflation.
Inflation Data and Rate-Hike Expectations Drive Wall Street Higher
Stocks closed higher on Friday as rebounding consumer costs reinforced the likelihood that central bank policymakers will act aggressively. U.S. consumer prices accelerated last month as the cost of gasoline rebounded after two straight monthly declines. The Consumer Price Index rose 0.4% in August following a 0.1% increase in July.
The stronger-than-expected economic indicators pushed interest rate futures sharply higher. According to the CME FedWatch tool, traders priced in a nearly 90% probability that the central bank will raise rates at its upcoming policy meeting on Wednesday, a steep climb from the 72% likelihood recorded just a day prior.
Martin added that The Fed will do the right thing and raise rates, and that is good at the margin for keeping inflation in check.
Market participation remained relatively light during the session, with 14.0 billion shares traded on U.S. exchanges compared to a 20-session average of 14.9 billion shares.
Jobs Report and Global Pressures Complicate the Policy Outlook
The inflation data mirrored robust labor market figures that also weighed on broader market sentiment. Nonfarm payrolls increased by 172,000 jobs in May after rising by an upwardly revised 179,000 in April, according to the U.S. Labor Department’s Bureau of Labor Statistics. Economists surveyed by Reuters had anticipated a gain of 85,000 jobs.
Bart Melek, global head of commodity strategy at TD Securities, noted the scale of the labor expansion. We’ve got payrolls that came in fairly significantly over what was expected,
Melek said.
Melek pointed out that ongoing geopolitical conflict and sustained energy costs eliminate any possibility of near-term monetary easing. “In light of the fact that we continue to have the war in Iran and very large energy prices and inflationary pressures, it makes it quite unlikely that the Fed is in any mood whatsoever to lower rates,” Melek said. The implication for gold here is that the cost of carry is getting quite high.
Tech Stocks Rally as Oracle Earnings Fuel Hardware Gains
AI server maker Dell soared 12% to reach a record high. Hewlett Packard Enterprise jumped 12% and HP gained 8.4% after Oracle’s quarterly results topped estimates, though Oracle shares dipped 1.8% during the session.
The broader market performance reflected widespread gains across multiple sectors. Nine of the 11 S&P 500 sector indexes advanced, paced by a 1.35% increase in communication services and a 1.13% rise in consumer discretionary stocks. The S&P 500 closed up 0.86% at 7,656.98 points, the Nasdaq Composite gained 0.96% to 26,333.04 points, and the Dow Jones Industrial Average climbed 0.98% to 52,573.29 points.
Commodity Pressures and M&A Activity Shape Trading Conditions
Commodity markets reacted sharply to Middle East shipping route disruptions and shifting monetary policy bets. Spot gold dropped 2.2% to $4,375.19 per ounce, while U.S. gold futures for August delivery fell 2.2% to $4,405.10. Precious metals faced additional headwinds as U.S. Treasury yields jumped following the jobs report, increasing the opportunity cost of holding non-yielding bullion.
Oil prices retreated on Friday but remained elevated for the week due to persistent shipping route attacks. Brent crude futures slipped almost 3% but were still above $104 a barrel, finishing the session down after trading near overnight levels.
Corporate dealmaking provided a distinct bright spot. Shares of ACV Auctions soared 44% after online vehicle auctioneer Copart agreed to buy it in a transaction valued at nearly $1.9 billion.
Federal Reserve Policy Meeting Looms as Markets Weigh Valuations
Despite Friday’s advance, Wall Street experienced a volatile week marked by nervousness over inflation, rising long-term Treasury yields, and heavy corporate spending on artificial intelligence infrastructure. For the week, the S&P 500 dipped 0.8% and the Nasdaq lost 0.7%.
At the same time, the S&P 500’s recent pullback has compressed valuations. The benchmark index is trading at 19 times expected earnings, marking its cheapest forward price-to-earnings multiple since April 2025.
Market attention now shifts directly to the Federal Reserve’s upcoming policy meeting scheduled for Wednesday, where investors anticipate officials will formally approve an interest rate increase to address ongoing price pressures.
