Stocks close sharply higher after inflation data; Dow snaps longest weekly losing streak since 1932

U.S. stocks ended sharply higher Friday, with all three major benchmarks booking weekly gains, after the Federal Reserve’s preferred measure of inflation for April had the smallest increase in a year and a half. 

How did stock indexes trade?
  • The Dow Jones Industrial Average
    DJIA,
    +1.76%

    gained 575.77 points, or 1.8%, to close at 33,212.96, rising for a sixth straight day in its longest winning streak since December 2021.

  • The S&P 500
    SPX,
    +2.47%

    rose 100.40 points, or 2.5%, to finish at 4,158.24.

  • The Nasdaq Composite
    COMP,
    +3.33%

    jumped 390.48 points, or 3.3%, to end at 12,131.13.

For the week, the Dow gained 6.2%, breaking an eight-week stretch of losses that was its longest since 1932, according to Dow Jones Market Data. The S&P 500 booked a weekly gain of 6.6% while the Nasdaq climbed 6.8%, each snapping seven straight weeks of declines. Both the Dow and the S&P 500 booked their largest weekly percentage gains since November 2020.

What drove the markets?

Stocks ended the week on an upbeat note after being battered over the past couple months.

The market is “giving a sigh of relief,” said Tim Courtney, chief investment officer of Exencial Wealth Advisors, in a phone interview Friday. It’s “seeing the light at the end of the tunnel on the inflation story.”

The U.S. inflation rate, as measured by the personal-consumption expenditures index, rose just 0.2% in April for its smallest monthly increase in a year and a half, due largely to a decline in gas prices. While gas prices subsequently rebounded, there were other hints that a surge in inflation might be abating.

The rate of core PCE inflation, the Fed’s preferred measure, slowed over the past year to 4.9% from 5.2%, in a second straight monthly decline. The last time the core rate saw back-to-back declines was in the first few months of the pandemic in early 2020.

Read: Even this pessimistic Bank of America strategist says the bear-rally bandwagon has room to charge ahead

Meanwhile, the University of Michigan’s gauge of consumer sentiment fell to a final May reading of 58.4 from the initial reading of 59.1 earlier in the month, its lowest level in more than 10 years. Economists were expecting a reading of 59.1, according to a Wall Street Journal survey. Americans’ expectations for overall inflation over the next year fell to 5.3% in May from 5.4% in April, while expectations for inflation over the next 5 years remained at 3%.

Read: What if we get a ‘soft landing’ for the economy after all?

All three major U.S. stock benchmarks booked gains this week following some relief over the minutes of the Fed’s early May meeting, released Wednesday, which drove speculation over a potential pause in interest rate hikes later this year. A hardy batch of earnings reports from retailers also helped boost stock prices.

Still, wariness remains among analysts over whether Wall Street volatility may have merely ebbed for now.

Read: Forget the ‘Fed put’ — here is how corporate buybacks could rescue stocks

Pessimism had gotten so “deep” in the stock market that it was in a place “to react more positively to even incrementally OK news,” according to Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

“It’s too early, certainly, to wave anything like an ‘all clear’ flag,” Ma said in a phone interview Friday. “I still expect choppy markets.”

Which companies were in focus?
How did other assets trade?
  • They yield on the 10-year Treasury note BX:TMUBMUSD10Y edged down less than 1 basis point Friday to 2.748%, down six of the past eight trading days, according to Dow Jones Market Data. Treasury yields and prices move in opposite directions.

  • The ICE Dollar Index 
    DXY,
    -0.19%
    ,
     which measures the greenback against major currencies, was down about 0.2%.

  • Oil futures
    CL00,
    +0.86%

     rose, with West Texas Intermediate crude for July delivery
    CLN22,
    +0.86%

    ending 0.9% higher at $115.07 a barrel, the highest close for a front-month contract since March 11.

  • Gold 
    GC00,
    +0.16%

     for June delivery rose 0.2% to settle at $1,851.30 an ounce.

  • Bitcoin
    BTCUSD,
    +0.27%

    was off 2% at $28,863.

  • In European equities, the Stoxx Europe 600 
    SXXP,
    +1.42%

     closed 1.4% higher and booked a 3% gain for the week. London’s FTSE 100
    UKX,
    +0.27%

    ended 0.3% higher, for a weekly advance of 2.6%.

  • In Asia, the Shanghai Composite 
    SHCOMP,
    +0.23%

    finished 0.2% higher Friday but slid 0.5% for the week. Hong Kong’s Hang Seng Index 
    HSI,
    +2.89%

     rose 2.9% Friday, but remained down 0.1% for the week. Japan’s Nikkei 225 index 
    NIK,
    +0.66%

    ended 0.7% higher Friday, booking a weekly gain of 0.2%.

—Barbara Kollmeyer contributed to this report.

Source: https://www.marketwatch.com/story/u-s-stock-futures-inch-higher-ahead-of-feds-favorite-inflation-gauge-11653642699?siteid=yhoof2&yptr=yahoo