US stocks rise as the Fed's favorite inflation gauge drops to 2-year low

• US stocks rose higher on Friday as the Fed's favorite inflation gauge cooled to a two-year low.
• PCE inflation rose just 0.2% month-over-month in June, in line with economists' expectations.

US stocks rose on Friday as traders digested cooler inflation data.

All three major indexes turned higher, with the Dow Jones Industrial Average and S&P 500 set to close out their third straight week of gains. The Dow narrowly missed out on a historic winning streak in the previous session, closing lower to snap what would have been 14 straight days in the green. It would have tied a record set 126 years ago.

The Personal Consumption Expenditures index, the Federal Reserve's preferred inflation measure, rose just 0.2% in June, in-line with economists' estimates. Meanwhile, core PCE rose 4.1% year-over-year, slightly lower than the expected 4.2% increase.

The data suggests the Fed's monetary tightening is working to cool off the economy, leading investors to anticipate an end to the its rate hikes on the horizon. Markets are pricing in an 80% chance the central bank keeps interest rates unchanged at its September policy meeting, according to the CME FedWatch tool.

Commentators point out that headline inflation remains well-above the Fed's 2% long-run target. Prices accelerated 3% in the June Consumer Price Index report.

"Friday's PCE suggests that inflation is continuing to decelerate, but it remains firmly above the Fed's 2% target, which suggests that the Fed still has more work to do and may continue raising interest rates. The potential for additional tightening, after over a year of steep rate hikes, risks slowing the economy," Treasury Partners chief investment officer Richard Saperstein said in a statement on Friday.

"Investors continue to embrace the soft landing scenario and begin to focus on 2024 earnings, but this optimism is too premature as the lag effects from the Federal Reserve's tightening have yet to fully play out and remain a wildcard for stocks and the economy," Saperstein added.

Here's where US indexes stood shortly after the 9:30 a.m. ET opening bell on Friday:

• S&P 500: 4,572.76, up 0.78%
• Dow Jones Industrial Average: 35,483.44, up 0.57% (200.72 points)
• Nasdaq Composite: 14,217.88, up 1.18%

Here's what else happened today:

• The crypto sector is rife with fraud and "hucksters," Securities Exchange Commission chair Gary Gensler warned.
• "Shark Tank" investor Kevin O'Leary thinks more regional bank failures are on the way as the Fed continues to hike interest rates.
• Cocoa prices just hit a 12-year-high as foodflation worsens.

In commodities, bonds and crypto:

• West Texas Intermediate crude oil slipped 0.4% to $79.78 per barrel. Brent crude, oil's international benchmark, ticked lower 0.4% to $83.91.
• Gold rose 0.4% to $1,954 per ounce.
• The yield on the 10-year Treasury fell two basis points to 3.985%.
• Bitcoin fell 0.68% to $29,267, while ether fell 0.33% to $1,869.