Dow ends higher after UnitedHealth gains, other indexes slip on rate cut uncertainty
A meeting between U.S. President Donald Trump and Russian counterpart Vladimir Putin was also on the radar, with markets hoping it could pave the way for a resolution to the Ukraine conflict and determine the outlook for crude prices. The two leaders began a meeting in Alaska on Friday afternoon.
UnitedHealth Group rose almost 12%, its biggest single-day percentage rise since March 2020, after Warren Buffett's company revealed a new investment in the health insurer, while Michael Burry's Scion Asset Management also turned more bullish on the company.
Rising costs in the broader healthcare sector and about a 40% slump in UnitedHealth's shares this year have left the Dow lagging its Wall Street peers on the road to record highs. The price-weighted index last scaled an all-time high on December 4.
The healthcare sector gained 1.65% on Friday, tracking its best weekly performance since October 2022.
The Dow Jones Industrial Average rose 34.86 points, or 0.08%, to 44,946.12, the S&P 500 lost 18.74 points, or 0.29%, to 6,449.80 and the Nasdaq Composite lost 87.69 points, or 0.40%, to 21,622.98.
More broadly, Wall Street's main stock indexes recorded their second week of gains, buoyed by expectations that the Fed could restart its monetary policy easing cycle with a 25-basis-point interest rate cut in September.
The central bank last lowered borrowing costs in December and said U.S. tariffs could add to price pressures. However, recent labor market weakness and signs that tariff-induced inflation was yet to reflect in headline consumer prices have made investors confident of a potential dovish move next month.
'The question is, has the tariff gotten into the price of goods yet? And it appears that there hasn't,' said Joe Saluzzi, co-head of equity trading at Themis Trading.
Saluzzi also said while markets have largely priced in a September rate cut, investors might be overlooking risks, with low volatility and rich valuations pointing to a sense of complacency.
In a mixed day for economic data, a report showed retail sales in July rose as expected, but consumer confidence and factory production numbers indicated tariffs were taking a toll on other pockets of the economy.
'Today is a normal pullback given the recent strong gains,' said Eric Teal, chief investment officer at Comerica Wealth Management.
'We will have to wait for the personal consumption expenditures data which the Fed prefers and has been running a bit hotter than CPI of late to see how much inflation is finding its way into the system.'
Chicago Fed President Austan Goolsbee was also cautionary in his remarks.
Trump has said he will unveil tariffs on steel and semiconductors next week.
Among other stocks that were on the move, Applied Materials tumbled 14% after the chip equipment maker issued weak fourth-quarter forecasts.
Shares of Bank of America dropped 1.6% after Berkshire Hathaway reduced its stake in the second-biggest U.S. lender by 4.2% to 605.3 million shares. It still owns about an 8% stake in BofA.
Intel rose 2.9% after a report said the Trump administration was in talks for the U.S. government to potentially take a stake in the chipmaker.
Declining issues outnumbered advancers by a 1.3-to-1 ratio on the NYSE. There were 244 new highs and 45 new lows on the NYSE.
On the Nasdaq, declining issues outnumbered advancers by a 1.36-to-1 ratio.
The S&P 500 posted 10 new 52-week highs and no new lows while the Nasdaq Composite recorded 79 new highs and 81 new lows.
Volume on U.S. exchanges was relatively light, with 16.3 billion shares traded, compared to an average of 18.2 billion shares over the previous 20 sessions.
For the week, the S&P 500 gained 0.94%, the Nasdaq rose 0.81%, and the Dow climbed 1.74%. The Russell 2000 Small Cap Index .RUT rose 3.13%.
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The market has largely viewed the latest overnight release of the Consumer Price Index (CPI) inflation report in a positive light. The nominal CPI rose by 2.7% year-on-year, slightly below the expected 2.8%. The report also indicated stronger-than-expected inflation in service, while goods inflation came in lower than anticipated. These figures have reinforced market expectations for a rate cut and boosted the performance of U.S. stocks overnight. Specifically: All three major U.S. stock indices rose by more than 1% overnight, with the S&P 500 and the tech-heavy Nasdaq Composite both closing at record highs. According to CME FedWatch, the market's probability of a 25-basis-point rate cut by the Federal Reserve in September has increased from 85.86% the previous day to 94.93%. Although the market widely expects a rate cut in September, the focus among those supporting the move varies. Some are paying attention to inflation trends, while others are closely monitoring employment data. First, regarding the impact of Trump's tariff policies on inflation, expert opinions are divided. One camp argues that the effect of tariffs on U.S. inflation is actually quite limited. "Now you have six months of evidence, I don't really think tariffs cause inflation. Taxes don't cause inflation. And so what you're seeing in the data is very muted effects that are one time increases in the price level." It's worth noting that James Bullard is currently considered a top candidate for the next Federal Reserve Chair. In an interview with CNBC overnight, he also stated that he expects the Fed to cut rates by a total of 100 basis points over the next year. Meanwhile, another camp in the market warns that the impact of tariffs on inflation may gradually become more apparent in the future. Experts caution that, in addition to nominal CPI, it's crucial to monitor the trajectory of core CPI. "We are seeing a little bit of an uptick in the sequential core inflation and underlying inflation data. And I think a large part of that is the moderate impact we're seeing of tariff pass through that that is likely to grow in the months ahead." Additional analysis points out that while businesses may absorb costs in the short term, they will ultimately pass them on to consumers, particularly in industries with already narrow profit margins. "For instance, groceries, I mean, there's very little margin there. They're going to, you know, your tomato prices are going to go up because of because they can't really absorb, you know, those prices. It's just a matter of time that this, that the tariff related inflation starts to show up in the data." Finally, it's noteworthy that no consensus has yet been reached within the Federal Reserve regarding the pace of future rate cuts. Currently among Fed officials, Michelle Bowman and Christopher Waller represent the dovish camp advocating for . However, Jeffrey Schmid, President of the Kansas City Fed struck a hawkish tone overnight, arguing for . With moderate voices further complicating the divide, analysts suggest that even if the Fed initiates a cut in September, the pace may remain measured due to persistent internal disagreements.
