U.S. stocks rebounded sharply on Friday as investors looked past a sticky inflation report and welcomed a pullback in oil prices following four consecutive losing sessions. The Dow Jones Industrial Average climbed about 1.1%, while the S&P 500 gained roughly 1% and the Nasdaq Composite rose 1.1%, putting technology stocks slightly ahead of the broader market.
The rally came despite an August Consumer Price Index report that strengthened expectations for another Federal Reserve rate hike. Headline inflation matched forecasts, but firmer underlying price pressures pushed the market-implied probability of a quarter-point hike next week to nearly 90%, while Brent crude retreated after briefly reaching $108 per barrel Thursday.
Market Movers:
- ACV Auctions (ACVA) +44%: Shares skyrocketed after Copart agreed to acquire the digital vehicle auction platform for $10.50 per share in cash, valuing ACV at roughly $1.9 billion. The offer represents about a 45% premium to ACV’s unaffected August 10 closing price, with the transaction expected to close by the end of 2026.
- Copart (CPRT) +7%: Shares rallied alongside ACV after announcing the $1.9 billion acquisition, which Copart plans to finance with cash on hand. The company expects the transaction to be neutral to earnings in its first full year before becoming accretive beginning in fiscal 2028.
- Oracle (ORCL) +7%: Shares surged after fiscal first-quarter revenue jumped 30%, including a 62% increase in cloud revenue and a 121% surge in infrastructure sales. Remaining performance obligations soared by $209 billion to $664 billion as Oracle continued to benefit from massive demand for AI computing capacity.
- Kroger (KR) +4%: Shares rose after the grocery chain delivered better-than-expected fiscal second-quarter results, with operating profit increasing to $971 million from $863 million a year earlier. Kroger maintained its full-year adjusted EPS outlook but lowered its identical-sales growth forecast to a range of 0.2% to 0.8%.
- Zumiez (ZUMZ) -16%: Shares plunged after the retailer reported a wider quarterly loss as revenue fell 2.5% and comparable sales declined 2.1%. Zumiez also issued cautious third-quarter guidance and plans to close roughly 16 stores during fiscal 2026.
- Chewy (CHWY) -5%: Shares fell after JPMorgan downgraded the online pet retailer to Neutral from Overweight and lowered its price target to $24 from $29. The firm pointed to continued macroeconomic pressure and sluggish organic growth despite Chewy gaining market share and adding active customers.
- Exelixis (EXEL) -4%: Shares declined after the FDA extended its review of zanzalintinib by three months to March 3, 2027. The agency classified updated safety and efficacy information submitted by Exelixis as a major amendment, delaying a potential decision on the cancer treatment.
- Adobe (ADBE) -3%: Shares slipped despite fiscal third-quarter earnings and revenue beating expectations and the company raising its full-year outlook. Investors instead focused on fourth-quarter revenue guidance that came in slightly below Wall Street expectations at the midpoint.
CPI Keeps a September Rate Hike in Play
August inflation offered Wall Street a mixed picture. Consumer prices increased 0.4% from July and 3.4% from a year earlier, matching expectations, but the underlying monthly core reading came in hotter than anticipated. That was enough to strengthen expectations that the Fed will raise rates next week. Markets were pricing an approximately 87% to 90% probability of a quarter-point increase Friday, up dramatically from around 50% just one week earlier.
Oil Retreats, but Energy Inflation Remains a Threat
Oil provided stocks with some relief Friday after its relentless climb earlier in the week. Brent crude fell roughly 3% to around $104 per barrel after reaching $108 Thursday, helping ease some of the immediate pressure on equities and Treasury yields. But the inflation threat from energy has hardly disappeared. U.S. diesel prices reached a record $6.05 per gallon Friday, up from $5.32 a month ago and just $3.70 a year earlier, raising concerns about higher transportation costs eventually spreading throughout the economy.
Consumers Are Growing More Worried About Inflation
Friday also brought another warning sign from the University of Michigan’s consumer survey. Preliminary September sentiment dropped to 47.8 from 51.7 in August, missing expectations and marking a second consecutive monthly decline. More concerning for the Fed, one-year inflation expectations jumped to 4.6% from 4%, while longer-term expectations edged up to 3.4%. Rising fuel prices and trade tensions are increasingly shaping how consumers view the inflation outlook.
Looking Ahead
Friday’s rally shows investors were prepared for sticky inflation, but the market now faces a much clearer Fed risk. With rate-hike odds approaching 90%, attention shifts to next week’s policy decision and, crucially, what policymakers signal about the possibility of additional tightening. Oil remains another major wildcard. Friday’s retreat offered stocks some breathing room, but crude above $100 and record diesel prices could keep inflation elevated well beyond the September meeting, making the Fed’s path, and Wall Street’s, considerably more complicated.
