Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed higher on Friday, ending a three-day losing streak.
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The indexes got a boost after August’s Personal Consumption Expenditures (PCE) came in line with expectations, rising by 0.3% month-over-month and 2.7% year-over-year. PCE tracks the prices of a wide range of goods and services and is the Fed’s preferred gauge of inflation. Core PCE, which excludes volatile food and energy items, was in line with the estimate as well and rose by 0.2% month-over-month and 2.9% year-over-year.
Furthermore, the Bureau of Economic Analysis announced that consumer spending ticked higher by 0.6% month-over-month in August, ahead of the estimate for a 0.5% rise. That comes one day after the Commerce Department revised second quarter consumer spending growth to 2.5% from 1.6%. That helped raise its final gross domestic product (GDP) growth estimate for the second quarter to 3.8% from 3.3%.
The data helped the market recover from several new tariffs announced by President Trump. Effective October 1, branded or patented pharmaceutical products will incur a 100% tariff, while kitchen cabinets, bathroom vanities, and related products will receive a 50% tariff.
“The reason for this is the large scale ‘FLOODING’ of these products into the United States by other outside Countries,” Trump said in a Truth Social post. Furthermore, upholstered furniture will be hit with a 30% tariff and heavy trucks will face a 25% duty.
Trump added that foreign pharmaceutical companies that are in the process of constructing manufacturing plants in the U.S. will be exempt from the higher tariff. Later, a White House official clarified that countries that have signed U.S. trade deals that include pharmaceutical terms will be exempt as well, such as the European Union and Japan.
Despite better-than-expected purchase activity, consumers remain irritated with higher prices. In September, consumer sentiment fell for a third consecutive month to 55.1, as tracked by the University of Michigan. That came in below the estimate for 55.4.
“Consumers continue to express frustration over the persistence of high prices, with 44% spontaneously mentioning that high prices are eroding their personal finances, the highest reading in a year,” said Surveys of Consumers Director Joanne Hsu.
In addition, inflation expectations remain elevated, with respondents expecting year-ahead inflation of 4.7% and long-term inflation of 3.7%.
The S&P 500 (SPX) closed with a 0.59% gain, while the Nasdaq 100 (NDX) returned 0.43%.
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