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Stocks rise for the first time in 4 days after tame inflation data

CNBC logo CNBC 4 days ago Thomas Franck
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U.S. equities edged higher Friday as weak inflation data encouraged investors that the Federal Reserve will keep monetary policy lower for longer. Gains were muted as tensions between the U.S. and North Korea persisted.

The Dow Jones industrial average rose about 50 points higher, with Apple contributing the most gains. Entering Friday's session, the Dow was on track to post its worst weekly performance since March 24.

The S&P 500 rose 0.30 percent with information technology and health care leading advancers. The index stared at its biggest weekly loss since the election before the open.

The Nasdaq composite outperformed, rising 0.6 percent as large-cap tech stocks rebounded.

The Labor Department said on Friday the Consumer Price Index edged up 0.1 percent last month, versus expectations of a 0.2 percent gain. The index is a widely followed inflation metric.

"Because the numbers came in lower, the market saw that as an indication that the Fed won't raise rates in September," said Robert Pavlik, chief market strategist at Boston Private. "I'm not sure that the market believes that the Fed won't do anything to the balance sheet."

Investors looked at inflation data for clues on the Fed's next monetary policy move. Market expectations for a December rate hike fell after the CPI data was released. Just 38 percent of investors expected the central bank to rates again at the end of the year, down from about 45 percent, according to the CME Group's FedWatch tool.

"With weak inflation, if not turning down, it will make it even more difficult for the Fed to do anything, between today's CPI and yesterday's PPI," said Baird Chief Investment Strategist Bruce Bittles. "Are you going to raise rates in this environment?"

Stocks are coming off their worst session since May as tensions between the U.S. and North Korea linger.

In the latest developments between the two countries' war of words, President Donald Trump on Friday tweeted another stark warning to North Korea.

The tweet came a day after Trump said his previous warning to North Korea that it would face "fire and fury" may not have been "tough enough."

"This is a very fluid environment. Typically you would see buyers coming in off a sell-off … you could see some buying on the dips," said Prudential Financial chief market strategist Quincy Krosby.

"We could see some zigging and zagging going into the weekend."

The CBOE volatility index (VIX), widely considered the best gauge of fear in the market, hit its highest level since the presidential election before easing to 14.89.

Before this week, U.S. stocks have been hitting record highs, boosted by mostly stronger-than-expected earnings. Snap, however, did not beat expectations. The social media company posted a larger-than-expected loss and smaller-than-expected revenue, sending the stock down more than 10 percent.

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