Stocks Rally, Close Week Higher, on Fed Rate Cut Hopes

U.S. markets end week on high note after unexpected CPI decline fuels rate cut hopes.

3 Updates 
Sun, November 10, 2024 At 10:15 AM EDT
DJ Shaw | Finance Reporter |

DIA hits record, SPY surges, after unexpected CPI decline fuels rate cut hopes

U.S. stocks ended Friday, and the week, on a high note, as the latest economic indicators have investors widely anticipating a September interest rate cut by the Federal Reserve. 

The cap-weighted SPDR S&P 500 ETF Trust (SPY) climbed 0.6%, and closed higher for the week, with about 90% of the shares in the S&P 500 rising Friday. Notable gainers include Enphase Energy Inc., up 6.9%, and Bank of New York Mellon Corp, up 5.2% after the bank reported that its second quarter fiscal results came in better than expected. 

This optimism stems from Thursday's U.S. Bureau of Labor Statistics report that headline CPI inflation unexpected dropped 0.1% month-over-month, the first decrease in 18 months. Economists had been expecting a 0.1% gain from May.

The narrower SPDR Dow Jones Industrial Average ETF Trust (DIA) added 0.7% as the Dow Jones closed at a record.

Despite a 0.1% decline in bitcoin’s price, the largest spot bitcoin ETF, the Blackrock Bitcoin Trust (IBIT), closed up 0.2%, highlighting divergence between the ETF and the underlying asset. 

Fri, July 12, 2024 At 1:00 PM EDT
Kent Thune | Research Lead |

IWM, RSP Build on Thursday's Momentum

Major market indexes were higher in midday trading Friday, as wholesale inflation rose more than expected in June and Thursday’s cooler inflation data again cheered investors hopeful for rate cuts.

Small caps and equal weight index funds outpaced the S&P 500 for the second consecutive day as the iShares Russell 2000 Index (IWM) and the Invesco S&P 500 Equal Weight ETF (RSP) both rose 1% while the SPDR S&P ETF Trust (SPY) gained 0.8.%

The bond market proxy iShares 20+ Treasury Bond Index (TLT) was barely in the green at 0.1% as fixed income investors digested data from Friday’s Producer Price Index, which reported a 0.2% month-over-month gain vs 0.1% expected and -0.2% prior.  

These muted gains came after Thursday’s rally that followed the Consumer Price Index report, which came in softer than expected. 

Fri, July 12, 2024 At 10:14 AM EDT
Kristin Myers | SVP Content/EIC |

Interest in Small Caps Jumps, Investors Digest Bank Earnings

Small caps are shining as market rotation from the high-flying 'Magnificent Seven' and into small caps sent the Russell 2000 Index over 3.5% higher Thursday. CALF, the Pacer U.S. Small Cap Cash Cows 100 ETF jumped .90% in early trading Friday while TNA, Direxion Daily Small Cap Bull 3x Shares soared over 3%. 

TNA is one of the most actively traded ETFs Friday morning, according to etf.com data, with more than 3.5 million shares in trading volume shortly after the opening bell. 

Performance chart of ETF CALF

The rising interest in small cap stocks comes as June's consumer price index (CPI) showed cooling inflation while the producer price index (PPI), a measure of wholesale inflation was flat in the core index. While a better-than-expected CPI report sent SPY, the SPDR S&P 500 ETF Trust, to record highs on Wednesday, investors are now betting on bigger gains in cheaper stocks that are rate-sensitive and perform well in a strong economy.

RSP, the Invesco S&P 500 Equal Weight ETF, a proxy for the 450-plus stocks that aren’t among the Magnificent Seven and the wider cohort of megacap stocks, rose nearly half a percentage point in early trading Friday.

A comparison chart of ETFs SPY and RSP

MAGQ, the Roundhill Daily Inverse Magnificent Seven ETF that bets on the falling prices of the Magnificent Seven, was one of the top gainers Friday, jumping over 5.5%.

XLF Wobbles as Investors Digest Bank Earnings 

The financial sector was wavering early Friday as big banks started to report earnings on Friday. XLF, the Financial Select Sector SPDR Fund moved in and out of the red amid the mixed bag of earnings reports.

 JPMorgan Chase saw a jump in quarterly profit from a one-time exchange of shares with Visa. Wells Fargo revenue and profits fell, and the bank slashed its annual outlook. Citigroup however posted a 10% rise in profit.

IYG, the IShares U.S. Financial Services ETF also wavered Friday, thanks to declines in JPMorgan and Visa on Friday. The fund has allocated nearly 20% of its holding to those two stocks.