CNBC Daily Open: All cleared for a soft landing?

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Summer ended green
The three major U.S. indexes climbed Friday, making August another month in the green for them, despite the sharp sell-off at the start of the month. The pan-European Stoxx 600 rose 0.09% on Friday, ending August around 1.3% higher to give it a record high closing level.

Softer-than-expected core inflation
The U.S. personal consumption expenditure price index for July inched up 0.2% on the month and was 2.5% higher from a year ago. Those figures are right on track with estimates. Core PCE, which excludes volatile food and energy prices, were up 0.2% in July and 2.6% from a year earlier, with the latter value 10 basis points lower than expected.

Chinese markets in the red
China’s two largest indexes, the Shanghai Composite and the Shenzhen Composite, are in the red for 2024 so far – and haven’t done well since the country opened up after Covid. To boost sentiment, the Chinese government needs to introduce fiscal support and boost consumer spending, said KraneShares Chief Investment Officer Brendan Ahern.

Happy Birthday, Mr. Buffett
Legendary investor Warren Buffett turned 94 on Friday. As if commemorating the occasion, Buffet’s sprawling conglomerate Berkshire Hathaway became the first nontechnology company to hit a $1 trillion market capitalization on Wednesday. Meanwhile, Buffett last week sold 21.1 million shares of Bank of America, adding $6 billion to Berkshire’s cash pile.

[PRO] Action-packed September
It’s going to be a packed month ahead, CNBC Pro’s Yun Li notes. The U.S. Federal Reserve will have its policy meeting on Sept 17-18, where market watchers expect the Fed to cut interest rates. Before that, however, August nonfarm payrolls will be out Sept. 6, and consumer and producer price indexes just a few days later.

It’s undeniable that July’s jobs report was bad. Panic spread. Goldman Sachs raised its forecast for the U.S. to enter a recession in the next 12 months to 25% from 10%.

But, with the benefit of hindsight, it seems such panic seems overblown. The PCE index came in exactly as anticipated, meaning that inflation is continuing its controlled descent. More significantly, the report said consumer spending rose 0.5%. Even though that number didn’t deviate from expectations, it signals the U.S. economy – which is largely a consumer economy – is going strong.

That’s reflected in a sterling earnings season for the second quarter. The S&P 500 experienced a 13% earnings growth rate, according to LSEG. That beats estimates of 10.6% and is the highest since Q4 2021.

On the back of such positive data, Goldman on Friday – once pessimistic about the U.S. economy – revised its third-quarter gross domestic product estimate for the U.S. from 2.5% to 2.7%.

Markets reflected that improvement in outlook. With Friday’s gain, all major U.S. indexes finished August in the green. For the month, the S&P 500 is up 2.3%, the Dow Jones Industrial Average added 1.8% and the Nasdaq Composite ticked up 0.7%.

Such performance is more impressive when we recall how the S&P plunged as much as 7.3% and the Nasdaq 10.7% during the sell-off earlier in the month.

And with the Fed all but certain to cut rates a few weeks later, “the American economy is poised to grow at or above the long-term 1.8% rate,” – which should also “put a floor under growth and hiring,” wrote Joseph Brusuelas, chief economist at RSM.

Tamer inflation, hotter economy, stable jobs market: signs that the economy’s cleared for a soft landing.

— CNBC’s Jeff Cox, Lisa Kailai Han, Robert Hum and Pia Singh contributed to this report.