Stocks Rally to Record Highs as Softer Inflation Boosts Rate Cut Hopes

The stock market surged to fresh records on Friday, capping off a strong week for equities after the September Consumer Price Index came in slightly cooler than expected. The S&P 500 gained 0.8%, the Nasdaq Composite rose 1.2%, and the Dow Jones Industrial Average advanced 1.0%, with all three indexes setting new intraday and closing highs. The softer 0.3% CPI reading — below the 0.4% consensus — reinforced expectations for two additional Federal Reserve rate cuts before year-end, fueling renewed optimism across Wall Street.

The rally was broad-based, led by strong gains in mega-cap and technology names. The Vanguard Mega Cap Growth ETF climbed 1.1%, while the information technology sector led all S&P 500 groups with a 1.6% rise. Intel’s surprise earnings beat lifted sentiment across the chipmaking industry, while IBM and AMD surged nearly 8% each after Reuters reported that AMD processors had successfully run a key quantum-computing error-correction algorithm for IBM. The PHLX Semiconductor Index gained 1.9% as a result.

Alphabet also stood out among the major tech names, advancing 2.7% after securing a multibillion-dollar cloud partnership with Anthropic. The communication services sector followed with a 1.3% gain, supported by strength across its largest components. Financials rose 1.1%, bolstered by broad gains in banking stocks, while Coinbase jumped nearly 10% after a JPMorgan upgrade to Overweight. Utilities rounded out the list of top-performing sectors with a 1.2% gain.

Only four sectors finished in the red. Energy slid 1.0% as traders booked profits following a strong weekly run, even as oil prices remained up more than 7% for the week. Materials lost 0.6%, weighed down by a 6% drop in Newmont despite its earnings beat. The consumer discretionary group slipped 0.1% as Ford’s double-digit post-earnings gain was offset by a steep 15% plunge in Deckers Outdoor. Consumer staples fell 0.4%, while healthcare ended flat.

Smaller-cap stocks outperformed on rate-cut optimism, with the Russell 2000 climbing 1.3% and the S&P Mid Cap 400 up 0.6%.

Beyond the inflation data, sentiment was also supported by signs of easing trade tensions. President Trump confirmed plans to meet with China’s President Xi Jinping next Thursday, raising hopes for a near-term trade deal.

Heading into next week’s heavy slate of mega-cap earnings, investors are riding a wave of optimism powered by cooling inflation, renewed Fed support, and the prospect of improved U.S.–China relations. Alphabet, Amazon, Apple, Meta Platforms, and Microsoft all closed the week higher — a fitting prelude to what could be another defining stretch for the market’s biggest names.

Our FTinvest 11 model portfolio ended the session slightly higher, extending its recent consolidation phase. After a strong start that saw the index jump nearly 1% in early trading, momentum faded in the afternoon as profit-taking emerged across several of its leading components. By the close, the index managed to hold onto a modest gain of 0.16%, finishing the day at 846.92, essentially back to yesterday’s level.

The day’s action reflected a market still searching for direction following last week’s volatility. Early enthusiasm was fueled by optimism around upcoming earnings and stable macro signals, helping growth-oriented holdings lead the advance. However, as the session wore on, a combination of softer sentiment and muted activity caused the rally to lose steam.

Despite the pullback from morning highs, the overall tone remains constructive. FTinvest 11 continues to hold comfortably above its recent support zone, suggesting that investors are maintaining a cautiously bullish stance rather than retreating from risk. The muted close underscores a wait-and-see approach as markets prepare for upcoming economic data and earnings that could set the tone for the next move.

With the index hovering near the upper end of its recent range, the coming sessions will reveal whether FTinvest 11 can regain early-day strength and push decisively toward new highs or continue oscillating within its current narrow band.