Dow gains as Fed's favored inflation gauge cools

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Stocks traded mixed on Friday as investors embraced an inflation report seen as crucial to the Federal Reserve's next decision on interest rate cuts.
The S&P 500 (^GSPC) rose 0.1% after eking out a third record-high close this week. The Dow Jones Industrial Average (^DJI) gained 0.7%, while the tech-heavy Nasdaq Composite (^IXIC) sank just below the flatline.
The August reading of the Personal Consumption Expenditures (PCE) index, the inflation metric favored by the Fed, showed continued cooling in price pressures. The "core" PCE index, which is most closely watched by policymakers, rose 0.1% month over month, lower than Wall Street forecasts.
The PCE reading appeared to goose up bets on another jumbo-sized rate cut from the Fed next month. More than half of traders - around 52% - now expect a 50 basis point cut.
Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards
The stock gauges are on track for weekly wins after confidence in the economy returned to the market. A solid GDP reading, combined with continued cooling in inflation, has cemented growing conviction that the Fed can nail a "soft landing" as it embarks on a rate-cutting campaign.
Elsewhere, China added to its stream of stimulus measures, boosting markets once again. Mainland stocks scored their biggest weekly win since 2008, and luxury stocks are set for their best week in years as hopes for Chinese demand rise. Meanwhile, shares of Alibaba (BABA, 9988.HK), JD.com (JD, 9618.HK), and Meituan (3690.HK, MPNGY) surged amid the buying spree.
In other individual stock moves, Costco (COST) stock slipped in morning trading after the wholesale giant's revenue disappointed Wall Street.
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