Stocks Rebound as In-Line Inflation Data Revives Dip Buying and Fed Cut Hopes – US Market Wrap

A new wave of dip buying lifted stocks in the final stretch of the week after a key inflation gauge met expectations, giving the Federal Reserve some leeway to address labor-market cooling.

Following a three-day slide, the S&P 500 recovered. The bond market’s reaction to the data was relatively muted, with swap traders continuing to price in around 40 basis points of Fed cuts before the end of 2025. The dollar fell.

According to a report released on Friday, the personal consumption expenditures price index excluding food and energy increased 0.2% in August, compared to 0.3% the previous month. On an annual basis, the core measure remained at 2.9%, exceeding the Fed’s target.

President of the Federal Reserve Bank of Richmond, Barkin, stated that while unemployment and inflation have both fallen short of their targets, he sees only a limited risk of further deterioration.

Despite a decline in consumer sentiment, Friday’s data showed that US personal spending increased by more than expected, demonstrating resilience.