Stocks jumped Friday, and Wall Street capped off a turbulent week on a positive note as investors weighed fresh U.S. inflation data.

The Dow Jones Industrial Average rallied 654.27 points, or 1.64%, to finish at 40,589.34. The S&P 500 climbed 1.11% to end at 5,459.10, while the Nasdaq Composite gained 1.03% to close at 17,357.88.

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."

Investors continued their pivot into cyclical areas of the market and small caps, with the Russell 2000 rising 1.67%. Industrials and materials stocks rose, lifting their respective S&P sectors about 1.7%. 3M skyrocketed 23%, leading the industrials sector to the upside. The stock notched its best day since at least 1972.

Some technology names that have struggled amid this week's sell-off gained, with Microsoft and Amazon adding more than 1% each. Meta Platforms climbed nearly 3%. The S&P's information technology sector surged about 1%.

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."

That data comes at the end of a volatile week on Wall Street. The S&P 500 declined 0.8%, while the Nasdaq lost 2.1%. Both indexes posted back-to-back weekly losses for the first time since April. The Dow outperformed, adding 0.8%, and notching its fourth consecutive positive week for the first time since May. The action came as investors seemed to participate in a rotation into small caps and cyclicals.

In other news, medical device maker Dexcom plunged 41% after releasing disappointing fiscal full-year guidance. Footwear company Deckers reported fiscal first-quarter earnings and revenue that exceeded analysts' expectations, boosting shares 6%.