Latest Inflation Data Exactly What Stocks Needed to Hit New Record

Investors pushed stocks to fresh records on Friday morning, as September’s inflation print gave the signal to markets that the Federal Reserve is on course for more rate cuts in the months ahead.

Consumer prices rose 3% year-over-year in September, the Bureau of Labor Statistics said on Friday morning, slightly under economists’ expectations. It’s the first data point investors have gotten since the government shut down on October 1.

Here’s where major stock market indexes stood shortly after the 9:30 a.m. opening bell on Friday:

While the inflation rate remains above the Fed’s 2% target, a 3% level indicates that tariffs are not leaking into consumer prices to the degree economists had feared.

“As odd as it may seem, the Fed will be happy with inflation staying around 3% for the next couple of months. The tariff passthrough generally remains muted, as the focus shifts squarely to a weakening labor market,” said Olu Sonola, head of US economic research at Fitch Ratings.

Although the market did not get a jobs report for September, various indicators show that the labor market is cooling. Statistics from other sources, including ADP and outplacement firms, show that payroll growth is slowing and firing plans have risen at US companies.

Chris Zaccarelli, chief investment officer at Northlight Asset Management, said the latest economic data suggests that the bull market can continue for now.

“We understand that valuations are high and there are risks in the market, but with the Fed cutting rates — and this report does nothing to stop them from a 25-bps cut next week — and corporate profits continuing to increase, it’s hard to see an interruption of this year’s bull market.”

“Next year will bring new challenges,” he continued, “but we wouldn’t advise getting in the way of the upward trend between now and year-end.”