Wall St rebounds on tech recovery, small caps jump after benign inflation data
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PCE inflation rises moderately in June
Russell 2000 jumps
Deckers, Baker Hughes climb after results
Dexcom slips after cutting revenue forecast
Indexes up: Dow 1.37%, S&P 0.80%, Nasdaq 0.64%
Updated at 9:51 a.m. ET/1351 GMT
By Ankika Biswas and Lisa Pauline Mattackal
July 26 (Reuters) - Wall Street bounced back on Friday as megacap tech and chip stocks recovered from the week's pummeling, while a largely in-line key inflation reading kept bets for an early start to interest-rate cuts alive.
Industrial conglomerate 3M MMM.N jumped more than 17%, boosting the Dow, after the company raised the lower end of its annual adjusted profit forecast.
Chip stocks led the recovery in technology stocks, with the Philadelphia SE Semiconductor index .SOX on track to snap three sessions of losses as Nvidia NVDA.O, Intel INTC.O, Broadcom AVGO.O and Qualcomm QCOM.O rose between 1.2% and 2.6%.
The so-called Magnificent Seven stocks were mixed in early trading, with Apple AAPL.O, Tesla TSLA.O and Alphabet GOOGL.O slipping between 0.5% and 1.4%, while Microsoft MSFT.O, Meta Platforms META.O and Amazon.com AMZN.O rose 0.4% to 2%.
The 10-year Treasury yield US10YT=RR turned lower after the inflation figures were out. US/
Data showed the Personal Consumption Expenditures Price Index, the U.S. Federal Reserve's preferred inflation metric, rose 0.1% on a monthly basis in June and 2.5% annually, both as expected, while personal income was lower than expected.
The moderate rise in U.S. prices underscored an improving inflation environment, potentially positioning the Fed to start easing policy in September.
"You've got a pretty nice (inflation) report here that further emboldens the soft landing narrative," said Rick Meckler, partner at Cherry Lane Investments.
Economically sensitive small-cap stocks rose, with the Russell 2000 .RUT jumping1.7%, set for its third straight week of gains, if trends hold.
Bets of a 25-basis-point cut by the Fed's September meeting held steady at around 88% after the data, according to CME's FedWatch. Traders still largely expect two rate cuts by December, according to LSEG data.
At 9:51 a.m. ET, the Dow Jones Industrial Average .DJI was up 547.26 points, or 1.37%, at 40,482.33, the S&P 500 .SPX was up 43.42 points, or 0.80%, at 5,442.64, and the Nasdaq Composite .IXIC was up 109.36 points, or 0.64%, at 17,291.08.
However, the S&P 500 and the Nasdaq were still on track for a second straight week of losses as investors dumpedtech stocks in thepast few weeks. Disappointing earnings from Alphabet and Tesla sparked a steep sell-offin megacap and artificial-intelligence-linked shareson Wednesday.
"Next week is an even busier week for earnings reports than this week... after a rough week, on a summer Friday, markets have a chance to bounce higher," Meckler said.
Worries about WallStreet's growing dependence on a set of high-momentum stocks, whose valuations now appear inflated, have made underperformingsectors like mid- and small-cap stocks seem more attractive now thatearly rate cuts seem likely.
Rate-sensitive sectors led gains, with the S&P 500 Industrials .SPLRCI and Materials .SPLRCM indexes up more than 1% each, while the Dow Jones Transport index .DJT gained1.7%.
On the earnings front, DeckersOutdoor DECK.N jumped 10.5% afterraising its annual profit forecast, while oilfield services firm Baker Hughes BKR.O climbed 3.4% after beating estimates for second-quarter profit.
Medical device maker Dexcom DXCM.O slumped 40.2% after cutting its annual revenue forecast.
Of the 206 companies in the S&P 500 that have reported second-quarter earnings till date, 78.6% beat analysts' expectations, according to LSEG data.
Advancing issues outnumbered decliners by a 5.90-to-1 ratio on the NYSE, andby a 3.72-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and no new lows, while the Nasdaq recorded 111 new highs and 21 new lows.
U.S. stocks weekly performance https://tmsnrt.rs/3yauR7f
Reporting by Ankika Biswas and Lisa Mattackal in Bengaluru; Editing by Saumyadeb Chakrabarty and Pooja Desai
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