Wall St ends higher on revival supported by inflation data, tech
PCE inflation rises moderately in June
Russell 2000 gains for fourth day in five
Deckers, Baker Hughes climb after results
Dexcom slips after cutting revenue forecast
Updates to close
By David French
July 26 (Reuters) -Wall Street's major indexes closed higher on Friday, recouping some ground lost earlier thisweek, as investors flocked back to techmegacaps that had triggered broad sell-offs and inflation data boosted optimism that interest rate cuts will soon begin.
The Dow Jones Industrial Average .DJI led the way, aided by industrial conglomerate 3M MMM.N, which jumped to its largest daily percentage gain in decades after it raised the lower end of its annual adjusted profit forecast.
The S&P 500 .SPX and Nasdaq Composite .IXIC also finished the week stronger, aided by rebounds in megacap stocks that led the indexes'declines in the two prior sessions.
Members of the so-called Magnificent Seven mostly rose, led by Meta Platforms .META.O.
Chip stocks also rose, helpingthe Philadelphia SE Semiconductor index .SOX snap a three-day losing streak. Constituents Marvell Technology MRVL.O, Broadcom AVGO.O, Texas Instruments TXN.O and Qualcomm QCOM.O each advanced.
The 10-year Treasury yield US10YT=RR turned lower following the inflation data. US/
Economically sensitive small-cap stocks rose, with the Russell 2000 .RUT and S&P Small Cap 600 .SPCY both advancing to their fourth closing highs of the week.
The moderate rise in U.S. prices underlined an improving inflation environment, potentially positioning the Fed to start easing policy in September. The central bank's July monetary policy decision is due next week.
Bets on a 25-basis-point cut at the Fed's September meeting held steady at about 88% after the PCE reading, according to CME's FedWatch. Traders still largely expect two rate cuts by December, LSEG data showed.
Greg Boutle, head of US equity & derivative strategy at BNP Paribas, noted that the many factors at play helped to explain why markets were susceptible to periods of volatility, including this week.
"It's been a bit challenging for people to read what's going on because there is (portfolio) positioning, elections, CPI and the Fed, and earnings season, and these things are all pulling in slightly different directions," he said.
According to preliminary data, the S&P 500 .SPX gained 61.06 points, or 1.11%, to end at 5,460.28 points, while the Nasdaq Composite .IXIC gained 176.16 points, or 1.03%, to 17,357.88. The Dow Jones Industrial Average .DJI rose 658.54 points, or 1.66%, to 40,593.61.
Worries about Wall Street's growing dependence on a set of high-momentum stocks, whose valuations now appear inflated, have made underperforming sectors like mid- and small-cap stocks seem more attractive, now that early rate cuts seem likely.
Industrials .SPLRCI and Materials .SPLRCM were among the leaders across the S&P 500 sector indexes.
Among stocks boosted by earnings, Deckers Outdoor DECK.N jumped after it raised its annual profit forecast, while oilfield services firm Baker Hughes BKR.O climbed after beating estimates for second-quarter profit.
Norfolk Southern NSC.N soared afterthe rail operator reported second-quarter profit above Wall Street estimates thanks to robust pricing.
Medical device maker Dexcom DXCM.O slumped after cutting its annual revenue forecast.
Of the 206 companies in the S&P 500 that have reported second-quarter earnings, 78.6% beat analysts' expectations, LSEG data showed.
U.S. stocks weekly performance https://tmsnrt.rs/3yauR7f
Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru and David French in New York; Editing by Saumyadeb Chakrabarty, Pooja Desai and Richard Chang
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