Christine IdzelisMark DeCambre
The S&P 500 index rose to another record Friday, after investors pored over fresh U.S. economic data a day after an infrastructure spending agreement in Washington helped lift the broad market to all-time highs.
The Dow also finished higher, with the rise in Nike shares being a big driver of its gains. JPMorgan Chase & Co. also added to the benchmark’s performance, after the results of the Federal Reserve’s latest stress tests, released Thursday, showed banks have enough capital to withstand a severe global recession and so can resume paying dividends and buying back stock.
How did major benchmarks do?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +2.68% rose 237.02 points, or 0.7%, to 34,433.84 That compares with the blue-chip’s May 7 record of 34,777.76.
The S&P 500 /zigman2/quotes/210599714/realtime SPX +3.06% advanced 14.21 points, or 0.3%, to a record close of 4280.70.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +3.34% slipped 9.32 points, or less than 0.1%, to 14,360,39.
On Thursday , the Dow ended 322.58 points higher, up 1%, at 34,196.82. The S&P 500 advanced 24.65 points, or 0.6%, to 4,266.49 in what was then a record close, while the Nasdaq rose 0.7%, logging its 17th record close of 2021.
For the week, the Dow advanced 3.4%, marking its best weekly rise since March 12. The S&P 500 rose 2.7%, its largest weekly gain since Feb. 5, while the Nasdaq climbed 2.4%, scoring its biggest weekly advance since April 9, FactSet data show.
As for the stock performance of smaller companies, the Russell 2000 index /zigman2/quotes/210598147/delayed RUT +3.16% booked a 4.3% gain this week, its biggest weekly jump since March 12.
What drove the market?
Stocks mostly rose on Friday, booking gains for the week for the major U.S. indexes, as a key reading of inflation was interpreted by some as easing concerns about out-of-control price rises.
The U.S. core PCE price index, the Federal Reserve’s favored inflation gauge that strips out energy and food, rose 3.4% in the May year , the biggest increase since 1992. The overall PCE price index rose 3.9% for the year, the largest increase since August 2008.
However, the month-to-month increase for core inflation of 0.5% in May and 0.4% for the headline index were less than forecast and followed bigger monthly readings for April .
“I think 3.4% year over year given what happened” in the throes of the pandemic is “actually pretty light,” said Brad Neuman, director of market strategy at Alger, in a phone interview, referring to the 12-month jump in the core PCE index.
PCE data is considered a broader measure of inflation than the Labor Department’s consumer-price index as it reflects changes in consumer behavior and has a wider scope. The latest PCE readings support the Fed’s position that inflation is transitory and should bolster risk assets such as equities, said Anu Gaggar, senior global investment analyst for Commonwealth Financial Network, in emailed comments.
“Today’s inflation data should calm some nerves about runaway inflation,” said Ryan Detrick, Chief Market Strategist for LPL Financial, in an emailed statement Friday. “The PCE is the Fed’s favorite measure of inflation, and it very well could be near a peak in inflation, which should help the Fed keep it’s dovish policy stance.”
Meanwhile, U.S. consumer spending showed no increase May and consumer incomes declined 2% from April to May. Economists had expected income to fall 2.7%, while spending was expected to rise 0.4%.
U.S. stocks have fully recovered, and then some, from the swoon that followed last week’s Federal Reserve policy meeting, with the S&P 500 posting its best week since February.