The Dow and broader U.S. stock market opened higher on Friday, as consumer prices rose faster than expected, and investors looked past Republicans’ failed Covid-19 relief bill.
All of Wall Street’s major indexes opened higher on Friday, with the Dow Jones Industrial Average, rallying 140 points or 0.5%. The broad S&P 500 Index of large-cap stocks surged 0.7%, with ten of 11 primary sectors reporting gains. The technology-focused Nasdaq Composite Index rose by 0.8%.
The S&P 500’s materials index was the biggest gainer, rising 0.8%. Information technology and healthcare also outperformed.
On the opposite side of the spectrum, consumer discretionary shares plunged 1.8% as a whole. The discretionary component has gained 24% year-over-year, making it the second-best performing sector behind technology.
A measure of implied volatility known as the CBOE VIX declined sharply on Friday but continued to trade well above the historical mean. VIX fell 5.5% to 28.08 on a scale of 1-100, where 20 represents the long-running average.
The stock market opened strong on Thursday but finished sharply lower. That’s a bearish sign for equities, especially tech stocks, which recently slid into correction at the fastest-ever clip .
Senate Republicans and Democrats voted along party lines Thursday, as policymakers struck down the GOP’s so-called skinny Covid-19 relief package. All Democrats and one Republican–Rand Paul of Kentucky–voted against the bill.
Senate Democrats block Republicans’ relief bill. Watch the video below.
The GOP’s version of the stimulus relief bill included reinstating extra unemployment benefits but capped the amount at $300 per week. The first Covid-19 relief bill offered $600 in enhanced unemployment insurance. The measures did not include a second round of direct payments to individuals.
On the data front, U.S. consumer prices rose faster than expected in August. The consumer price index rose 0.4% in August and 1.3%, the Department of Labor reported Friday .
So-called core inflation, which strips away volatile goods such as food and energy, rose 0.4% on month and 1.7% annually.
The Federal Reserve has historically targeted inflation at 2% but is now willing to let price pressures exceed that target. Fed Chair Jerome Powell announced the policy shift last month–sending a strong signal that interest rates will be zero-bound for the foreseeable future.