Wall Street responded favorably to more good news on the U.S. economy's fight against inflation on Friday as the latest data showed more signs of cooling.

The Commerce Department released the Personal Consumption Expenditures (PCE) price index, a key indicator favored by the Federal Reserve, which showed a slowing of price increases in June. The PCE rose 4.1% from a year ago, the lowest annual increase in nearly two years.

Markets reacted swiftly to the data after Friday's opening bell. As of 11:21 a.m. ET, the Dow Jones Industrial Index had gained 240.09 points (0.69%) to 35,525.16, well on its way to extending a three-week winning streak. The Nasdaq Composite was up 1.87%, while the S&P 500 had gained 1.07%.

The news comes one day after economic data showed a surprise bump in GDP in the second quarter, and two days after the Federal Reserve's latest of 11 interest rate hikes, which appear to be having the desired effect on the inflation-ravaged US economy.

"Today's economic releases reaffirm the current market narrative that inflation is cooling and economic growth is continuing, which is a favorable environment for risk assets," George Mateyo, chief investment officer at Key Private Bank, told CNBC.

"The Fed and investors will take comfort in these numbers as they suggest that the inflation threat is dissipating and thus the Fed may now be able to go on vacation and assume an extended pause with respect to future interest rate increases."

The compilation of recent economic indicators has many economists, including Fed Chair Jerome Powell, predicting that the U.S. could avoid an predicted recession.