Stocks jump after US inflation data; US dollar nearly flat

By Caroline Valetkevitch

NEW YORK (Reuters) -Major stock indexes rose on Friday, with all three major U.S. stock indexes posting record closing highs after news that U.S. inflation rose less than expected last month, while the U.S. dollar index was nearly flat.

The U.S. Consumer Price Index rose 0.3% last month, slightly less than the expected 0.4%, after climbing 0.4% in August. That reinforced expectations that the Federal Reserve will cut interest rates at its policy meeting next week.

"Today's inflation data shows that we're not in a crisis like 2022. Prices are growing, but at a controlled pace. That's good news if you're hoping the Fed will continue to cut interest rates," said Callie Cox, chief market strategist at Ritholtz Wealth Management in Charlotte, North Carolina.

The Fed is expected to reduce rates two more times this year, with a quarter-percentage-point cut baked in for the October 28-29 meeting, according to LSEG calculations using rate futures.

The Canadian dollar barely reacted to U.S. President Donald Trump saying on social media that he was ending all trade negotiations with Canada. The Canadian dollar was last nearly flat versus the greenback. 

Upbeat earnings reports also boosted Wall Street indexes. Ford Motor shares jumped 12.2% after the company beat third-quarter profit expectations.

Analysts now expect third-quarter S&P 500 earnings growth of 10.4% year-on-year overall. That is up from estimated growth of 8.8% for the quarter at the start of the month, according to LSEG.

The Dow Jones Industrial Average rose 472.51 points, or 1.01%, to 47,207.12, the S&P 500 rose 53.25 points, or 0.79%, to 6,791.69 and the Nasdaq Composite rose 263.07 points, or 1.15%, to 23,204.87.

The S&P 500 and the Nasdaq recorded their largest weekly percentage gains since August, while the blue-chip Dow logged its biggest Friday-to-Friday jump since June.

Five of the so-called Magnificent Seven U.S. companies at the center of the artificial intelligence boom, including Apple and Microsoft, are due to report earnings next week. U.S. stock markets have surged this year, and some analysts see signs of a bubble.

MSCI's gauge of stocks across the globe rose 6.28 points, or 0.63%, to 1,001.37 and hit an all-time high of 1,002.96.

European shares also closed at a record high on Friday, boosted by the cooler U.S. inflation data. The pan-European STOXX 600 index ended up 0.23%.

The dollar index, which measures the greenback against a basket of currencies, fell 0.02% to 98.92, with the euro up 0.1% at $1.1629. Against the Japanese yen, the dollar strengthened 0.14% to 152.8.

    Euro zone business activity unexpectedly grew faster in October, data showed. Euro zone government bond yields rose.

    U.S. Treasury yields were little changed to modestly higher. The benchmark 10-year yield briefly turned lower after the CPI data but was last up 1.2 basis points (bps) at 4%. The yield, however, was down about 1 bp on the week, its fourth straight weekly decline.

    Oil prices, which had risen 5% on Thursday after the U.S. sanctioned major Russian oil companies, eased on Friday as skepticism crept into the market about the Trump administration's commitment to the sanctions. U.S. crude fell 29 cents to settle at $61.50 a barrel and Brent eased 5 cents to settle at $65.94.

Spot gold fell 0.57% to $4,101.29 an ounce.

(Reporting by Caroline Valetkevitch in New York and Elizabeth Howcroft in Paris; additional reporting by Laura Matthews in New York; editing by Toby Chopra, Joe Bavier, Alison Williams, Richard Chang and Edmund Klamann)