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Traders added to bets that the Federal Reserve will start U.S. interest-rate cuts next month with a quarter-point reduction in the policy rate, rather than a bigger half-point cut, after the U.S. central bank's preferred gauge of inflation for July showed inflation rose in line with economist expectations even as consumer spending increased solidly. Traders continued to see the Fed cutting rates by a full percentage point over the final three meetings of the year. Fed Chair Jerome Powell last week said "the time has come" to ease policy.

U.S. consumer spending increased solidly in July, suggesting the economy remained on firmer ground early in the third quarter and arguing against a half-percentage-point interest rate cut from the Federal Reserve next month. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.5% last month after advancing by an unrevised 0.3% in June, the Commerce Department reported on Friday. This implies that consumer spending maintained most of the momentum from the second quarter, when it helped to boost gross domestic product growth to a 3.0% annualized rate.

U.S. stock index futures extended gains on Friday after a key inflation report showed price pressures rose almost in line with expectations in July, confirming bets on an interest-rate cut at the Federal Reserve's September meeting. The Personal Consumption Expenditure index, the Fed's preferred measure of inflation, rose 2.5% in July on an annual basis, compared with an estimate of 2.6%, according to economists polled by Reuters. On a monthly basis, it rose 0.2%.

An inflation measure closely tracked by the Federal Reserve remained low last month, extending a trend of cooling price increases that clears the way for the Fed to start cutting its key interest rate next month for the first time in 4 1/2 years. Prices rose just 0.2% from June to July, the Commerce Department said Friday, up a tick from the previous month’s 0.1% increase. The slowdown in inflation could upend former President Donald Trump's efforts to saddle Vice President Kamala Harris with blame for rising prices.

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Wall Street pointed toward gains early Friday ahead of a highly anticipated inflation update from the U.S. government. Futures for the S&P 500 were up 0.4% before the bell, while futures for the Dow Jones Industrial Average rose 0.2%. Chipmakers were broadly higher before the open, led by Marvell Technology, which was up 10.6% after its latest quarterly results hit Wall Street's sales and profit targets.

The latest price moves in crypto markets in context for Aug. 30, 2024.

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