Stocks jumped out of the gate Friday as market participants brushed off the latest inflation data — and rising odds of a rate hike next week. Falling oil prices helped lift stocks, as did bargain hunters who emerged after four straight losses for the main indexes.
Ahead of the open, the Bureau of Labor Statistics (BLS) said headline inflation rose 0.4% from July to August, faster than the 0.1% increase the month prior but in line with economists’ forecasts. The August CPI was up 3.4% year over year, the same as July and matching estimates.
Higher gas prices were a major factor in the monthly inflation increase, with the index for gasoline rising 3.9% in August. Year over year, gas prices were up 27.4%.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
Core CPI, which excludes volatile food and energy costs, came in at 0.3% on a monthly basis in August, up from 0.2% in July. Year over year, core inflation was up 2.4%, slower than the 2.5% from the previous month and in line with economists’ estimates.
“For the Fed, it might have been possible to read the August CPI report as glass half full if nothing else were in the news,” says Bill Adams, chief U.S. economist at Fifth Third Commercial Bank. But a surge in energy costs in September “will probably tip the scale to a hike at next week’s meeting.”
Looking for more timely stock market news to help gauge the health of your portfolio? Sign up for Closing Bell, our free newsletter that’s delivered straight to your inbox at the close of each trading day.
While front-month West Texas Intermediate crude futures declined 2.7% today to $99.68 per barrel, they are up more than 16% for the month to date. And the average price for a gallon of diesel topped $6 for the first time Friday.
This, combined with the August CPI report, sent rate-hike odds soaring today. CME Group FedWatch shows futures traders are pricing in an 86% probability the Fed will hike the federal funds rate by 25 basis points next week, up from 71% one day ago.
The main indexes, meanwhile, snapped a four-day losing streak. The blue-chip Dow Jones Industrial Average rose 1.0% to 52,573, the broader S&P 500 gained 0.9% to 7,656, and the tech-heavy Nasdaq Composite climbed 1.0% to 26,333.
RBC sees new highs ahead for red-hot Dell
Dell Technologies (DELL) was one of the biggest gainers on Friday, surging 12% after RBC Capital Markets analyst David Paige initiated coverage on the PC maker with an Outperform (Buy) rating and a $640 price target. The target price represents implied upside of nearly 13% to Dell’s record intraday high of $567.75, which it hit today.
“With no signs of slowing, we believe DELL continues to be well positioned to benefit from a multi-year AI infrastructure spending cycle,” says Paige. And its “best-in-class supply chain represents a competitive moat that differentiates the company during periods of supply disruption, as customers increasingly turn to Dell for a ‘calming hand’ during periods of supply volatility/constraints.”
Dell easily beat fiscal 2027 second-quarter estimates earlier this month and ramped up its full-year forecast. It now expects fiscal 2027 revenue of $192 billion vs its previous guidance of $167 billion at the midpoint, due in part to price hikes.
DELL is up 350% year to date, making it one of the best S&P 500 stocks of 2026 so far.
Cisco is the best Dow stock today
Elsewhere in the tech space, Cisco Systems (CSCO) jumped 4.4%, making it the best Dow Jones stock on Friday. This is just more of the same for CSCO, which is up 45% for the year to date — the biggest return of any member of the 30-stock index.
Earlier today, a Reuters report indicated that the United Arab Emirates is revising plans to build an artificial intelligence data center in partnership with several American tech companies, including Cisco, due to the ongoing war in Iran.
Oracle (ORCL), which is also part of the partnership, saw its shares fall 1.7% today despite the tech giant reporting impressive earnings Thursday evening.
For its fiscal 2027 first quarter, Oracle said both earnings per share and revenue were up 30% year over year, while total cloud revenue surged 62%. It also gave in-line guidance for its fiscal 2027 second quarter and a better-than-expected full-year forecast.
The AI stock rallied more than 8% from September 1 through September 10, so today’s pullback could be profit-taking.