A cooler-than-expected inflation report is likely to give the Federal Reserve the confidence it needs to proceed with a rate cut next week, as markets now fully price in a quarter-point reduction in the federal funds rate.
Inflation rose 3% year-over-year in September, slightly up from August's 2.9% pace but below economists forecasts of 3.1%. Core inflation, which excludes food and energy, eased from 3.1% to 3%, cooling more than expected.
Wall Street cheered the data, with major indexes climbing to record highs. Markets now anticipate two additional rate cuts this year, followed by three more in 2026.
Stocks gained further after strong corporate earnings and optimism that President Donald Trump and Chinese President Xi Jinping may soon meet to discuss trade relations.
Michigan's auto giants were among the week's standout performers. General Motors Co. (NYSE:GM) and Ford Motor Co. (NYSE:F) each posted double-digit weekly gains after delivering upbeat quarterly results and forward guidance. General Motors shares surged to record highs on Friday, capping their best week since March 2020.
The automaker's stock jumped 15% on Tuesday after reporting third-quarter revenue of $48.6 billion, topping expectations of $45 billion, and earnings per share of $2.80 – well above forecasts of $2.29. GM said it plans to introduce hands-free, eyes-off driving capabilities by 2028, starting with its Cadillac Escalade IQ electric SUV.
At the same time, the company will cut back electric vehicle production and eliminate more than 200 positions at its suburban Detroit tech center as it adjusts to changing EV demand.
Ford shares also rallied, jumping 10% on Friday — the stock's best day since 2022. The company reported third-quarter revenue of $50.5 billion, up 9.4% from a year earlier, and earnings per share of 45 cents, beating Wall Street expectations of 36 cents.
Ford said it plans to boost F-150 and Super Duty truck production by more than 50,000 units in 2026, expanding operations in Michigan and Kentucky to meet growing demand.
Not all earnings news was upbeat. Netflix Inc. (NASDAQ:NFLX) tumbled more than 10% for the week after missing earnings expectations, hit by a $619 million tax charge in Brazil.
Energy stocks, which had sharply lagged the broader market before this week, rebounded after the Trump administration imposed new sanctions on Russian oil giants Rosneft and Lukoil in a bid to pressure Vladimir Putin toward a peace deal in the Ukraine war.
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Image created using artificial intelligence via Midjourney.
