Investing.com -- Stocks closed higher on Friday, with the Dow Jones Industrial Average (DJIA) reaching a new record as investors wrapped up a volatile month on a positive note. The market gains came as traders digested key inflation data closely monitored by the Federal Reserve.
The Dow rose 228.03 points, or 0.55%, ending the day at 41,563.08. The blue-chip index hit a fresh all-time high in the final minutes of trading, marking another record close. The S&P 500 gained 1.01% to finish at 5,648.40, while the Nasdaq Composite advanced 1.13% to 17,713.62.
The personal consumption expenditures price index, a key inflation measure favored by the Fed, increased by 0.2% in July, matching economists' expectations. Year-over-year, the index was up 2.5%. When excluding food and energy, the core index also saw a 0.2% rise from the previous month.
The Federal Reserve closely tracks this inflation gauge, and the data could play a role in its upcoming rate decision in September.
As August came to a close, the S&P 500 recorded a 2.3% monthly gain, its fourth consecutive monthly advance. The Dow gained nearly 1.8%, and the Nasdaq Composite posted a 0.7% increase.
This week, all eyes will be on the August jobs report, which is set to provide key economic insights ahead of the upcoming Federal Open Market Committee meeting.
Investors will also be closely monitoring several labor market updates throughout the week, along with important data releases, including the Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) for manufacturing and services, factory orders, and construction spending.
Strategists at Yardeni Research expect the upcoming labor market indicators “to show that August's employment continued to grow at a solid pace greater than July's pace, which was weakened by bad weather.”
“That should lift bond yields, the dollar, and cyclical sectors of the S&P 500,” they added.
This week’s earnings: Broadcom, DollarTree, Nio
In addition to economic indicators, several companies are preparing to release their earnings as the Q2 reporting season nears its end.
Investors will be focused on the retail sector, with both Dollar Tree (NASDAQ:DLTR) and Dick’s Sporting Goods Inc (NYSE:DKS) set to report.
However, the most anticipated earnings report will come from Broadcom Inc (NASDAQ:AVGO), a major player in the AI boom, scheduled for release after the market closes on Thursday.
Other notable companies reporting this week include Zscaler (NASDAQ:ZS), Hewlett Packard Enterprise (NYSE:HPE), DocuSign (NASDAQ:DOCU), Nio Inc Class A ADR (NYSE:NIO), and UiPath (NYSE:PATH).
What analysts are saying about US stocks
Citi: “We have argued for further S&P 500 upside during 2H24 albeit at a moderated pace vs 1H. NVDA and other components of the Mag 7 have contributed a disproportionate share of the YTD index return. We remain constructive on the fundamental setup during the second half despite ongoing recession concerns. Generative AI investment spending has exerted as a significant offset to more traditional macro concerns. Fundamental follow-through into 2025 should continue, although the current consensus for next year appears aggressive.”
Bank of America: “Nonfarm Payrolls (NFP) has regained its crown as the most important data release for stocks Into the print, Fed funds futures are pricing in a “recession-sized” 100bps of cuts for the rest of 2024. Equities seem more excited about the cuts than concerned about a potential recession, gauging by their return to near highs and the outperformance of small caps & equal-weighted S&P. If that’s true, the main risk for equities this week is a hot NFP that reprices short-term rates higher.”
BCA Research: “The ongoing deterioration in the labor market has progressed enough that we believe a recession is imminent.”
“We turned tactically defensive four weeks ago, as the labor market frayed enough to portend a recession. Investors should be using the post-August-5th bounce to reduce risk asset exposures.”
UBS: “Investors need to continue brace for lower rates as Fed cuts get underway.”
“A more mixed set of US labor data showed that the Fed now has both the imperative and the leeway to cut interest rates, in our view. US unemployment rose to 4.3% in July, and consumer price inflation slowed to 2.9% year-over-year. We now expect the Fed to cut rates at each of its three remaining meetings in 2024, but think market fears of a US recession are overdone.”