All three major US stock indexes closed at all-time highs on Friday after macroeconomic data released on the same day showed cooler-than-expected inflation figures and upbeat corporate earnings.
The S&P 500 and Nasdaq, both recorded their largest weekly percentage gains since August, while Dow Jones logged its biggest Friday-to-Friday jump since June.
The Dow Jones Industrial Average rose 472.51 points, or 1.01 per cent, to 47,207.12; the S&P 500 gained 53.25 points, or 0.79 per cent, to 6,791.69; and the Nasdaq Composite earned 263.07 points, or 1.15 per cent, to 23,204.87.
The Labour Department’s Consumer Price Index remained elevated in September, but was a bit eased than analysts had expected, calming fears of an exaggerated impact of tariffs on inflation. This seems to have set the stage for next week’s earnings report and placed all bets on another interest rate cut of 25 basis-points by the Federal Reserve at its monetary policy meeting next week.
The CPI report came despite the current government shutdown that’s driven by a congressional budgetary impasse.
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With 143 companies in the S&P 500 having reported, analysts expect third-quarter S&P 500 earnings growth of 10.4 per cent year-on-year in aggregate, marking a robust annual growth of over the 8.8 per cent expectations as of October 1, per LSEG.
Meanwhile, European shares also closed at record high, boosted by US inflation data and hopes of US-China trade negotiations gaining ground.
The continent-wide STOXX 600 index closed up 0.2 per cent. Most major regional indexes ended higher, with London's FTSE 100 also closing at a record high.
“Rate expectations in the U.S. have a huge impact on financial markets in the rest of the world, and share prices in Europe are probably an effect of what we saw in the US,” said Christoph Schon, head of investment decision research, EMEA, at SimCorp.
Industrial companies reported the highest gains, up 0.7 per cent, with Lifco gaining 10 per cent after posting third-quarter results above estimates, while Saab added 6.1 per cent after the defense group raised its full-year organic sales growth forecast. Heavyweights including Siemens Energy and Schneider also climbed.
Financial stocks also aided gains, with LSEG Group jumping about 5 per cent after some brokerages raised their price targets on the stock. NatWest rose 4.9 per cent after the lender reported a higher third-quarter profit and upgraded its performance target for the year.
Meanwhile, consumer-facing stocks fell, with the personal and household goods sector weighed down by a near 4 per cent decline in Kering after an HSBC rating downgrade.
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