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Stock Market Today - 8/12: Stocks End Higher as Inflation Concerns Ease

Fund managers are putting cash back into stock markets amid fading inflation fears and a run of four consecutive weekly gains for the S&P 500.

Updated at 4:20 p.m. EDT

U.S. Stocks finished the day sharply higher. The S&P 500, gained 72.88, or 1.7%, to 4,280.15, its highest close since early May. The Dow Industrials gained 424 points, or 1.3%, to end at 33,761. The Nasdaq Composite gained 267 points, or 2.1%, to end at 13,047.

Updated at 12:59 pm EST

U.S. stocks moved higher Friday, with the dollar clawing back gains against its global peers and Treasury bond yields edging north, as investors drew confidence from softer inflation data while parsing cautious comments from key Federal Reserve officials.

Slowing inflation figures earlier this week, including a flat month-on-month reading for July CPI and a pullback in factory gate prices, has clipped bets on another jumbo rate hike from the Fed when it meets next month in Washington.

However, San Francisco Federal Reserve Bank President Mary Daly warned yesterday that she didn't want to be 'head-faked' but a single data series, telling Bloomberg Television that she would be "open to 75 (basis points) should the data evolve differently."

Her comments followed a similar assessment from Minneapolis Federal Reserve Bank President Neel Kashkari, who told the Aspen Ideas Conference Wednesday hat the central bank is ""far, far away from declaring victory", and still sees the need of a Fed Funds rate approaching 4% by the end of the year.

Inflation data has dominated markets for much of the week, but a final reading on consumer expectations failed to cement bets that price pressures have peaked in the world's biggest economy.

The University of Michigan's closely-watched series of sentiment data, published at 10:00 am Eastern time, showed only a modest decline in inflation expectations for both this year and the next five, thanks in part to tumbling gasoline prices and improving job prospects.

Consumer sentiment, however, jumped sharply in August to 55.1, well ahead of the Street consensus of 52.5 and nearly four points higher than the July reading.

Data from the New York Federal Reserve's monthly survey earlier this week should the biggest pullback in inflation expectations, with consumers estimating a 6.2% rate for this year and 3.2% for 2023, down from 6.8% and 3.6% respectively in the New York Fed's June survey.

Rate bets remain tempered, with the CME Group's FedWatch now suggesting on a 61.5% chance of a 50 basis point hike in September, up from just 32% last week, but Treasury bond yields are quietly retracting back to levels prior to the July inflation release.

Benchmark 10-year notes were pegged at 2.857% in New York trading, while 2-year paper was changing hands at 3.253%. The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.36% higher at 105.459.

Global equity markets appeared more optimistic, even after last night's late-hour selloff on Wall Street, with the Nikkei 225 rising 2.62% in Tokyo to close at a seven-month high of 28,548.98 points following Thursday's public holiday.

The region-wide MSCI ex-Japan index was marked 0.16% higher into the close of trading, while Europe's Stoxx 600 gained 0.16% in Frankfurt trading.

Data from Bank of America's closely-watched Flow Show report, in fact, showed the biggest inflow into U.S. stocks in two months, while global equity funds pulled in $7.1 billion in new cash. 

Apple  (AAPL)  shares were active, rising 2.1% following a report that the tech giant will likely sustain the pace of iPhone sales into the final quarter of its fiscal year.

Johnson & Johnson  (JNJ)  shares ended off 1.1% after the consumer healthcare group said it would completely halt the sale of its iconic talc-based baby powder products next year.

Rivian Automotive  (RIVN)  shares, meanwhile, slipped after the upstart electric truckmaker forecast a wider-than-expected 2022 loss but stuck to its forecast of producing 25,000 vehicles by the end of the year.