Friday’s moves stem from a combination of oversold sentiment...

Friday’s moves stem from a combination of oversold sentiment, a stronger-than-expected GDP report Thursday and the view that the Federal Reserve will begin cutting rates due to economic resilience, said CFRA Research’s Sam Stovall.

“Today’s benign PCE report helped talk the market off the ledge,” he added. “With this pullback, the great rotation lives on and breadth continues to be on our side.”

Wall Street also assessed June’s personal consumption expenditures price index, an inflation reading that is preferred by central bank policymakers. On a monthly basis, headline PCE rose 0.1% and 2.5% from a year ago. That was in line with estimates from economists polled by Dow Jones.

This positive inflation news has also lifted investor hopes for more rate cuts this year, with the fed funds futures market pricing in cuts in September, November and December.

“The numbers have been coming in tamer,” said Ken Mahoney, president of Mahoney Asset Management. “In housing and real estate, you’re starting to see some cracks. They’re going to stop messing around, start cutting rates.”