By Christine Idzelis and William Watts
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 (DOW:DJIA) 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 (S&P:SPX) rose 100.40 points, or 2.5%, to finish at 4,158.24.
The Nasdaq Composite (NASDAQ:COMP) 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.
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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%.
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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.
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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?
Retailers were in focus Friday. Big Lots Inc. BIG shares sank 12.1% after the big-box retailer swung to a surprise loss and sales miss . Stock in Gap Inc. GPS rose 4.3% after the clothing retailer reported a wider-than-expected loss and disappointing forecast. Costco Wholesale Corp. COST raked in $1 billion more than expected in revenue in its latest quarter, but missed on same-store sales. Shares ticked up 1.2%.
Dell Technologies Inc. (NYS:DELL) shares jumped 12.9% after the computer equipment maker reported higher first-quarter sales and lower operating expenses.
Baidu Inc.’s (NAS:BIDU) Hong Kong-listed shares (HKG:HK:9888) surged around 14% after the Chinese search engine’s first-quarter results beat expectations and as several analysts raised their stock-price targets. U.S.-listed shares rose 2.1%.
Marvell Technology Inc. shares (NAS:MRVL) gained 6.7% after the semiconductor group reported solid earnings results and slightly-better-than expected guidance.
Ulta Beauty Inc. (NAS:ULTA) shares soared 12.5% after the beauty products retailer lifted its full-year sales and earnings guidance Thursday after better-than-expected first-quarter results.
Shares of Workday Inc. (NAS:WDAY) dropped 5.6% after the human resources cloud-software company on Thursday reported earnings that missed the Wall Street consensus and slightly raised its forecast.
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 (IFUS:DXY) , which measures the greenback against major currencies, was down about 0.2%.
Oil futures (NYM:CL00) rose, with West Texas Intermediate crude for July delivery ending 0.9% higher at $115.07 a barrel, the highest close for a front-month contract since March 11.
Gold (NYM:GC00) for June delivery rose 0.2% to settle at $1,851.30 an ounce.
Bitcoin (COINDESK:BTCUSD) was off 2% at $28,863.
In European equities, the Stoxx Europe 600 (STOXX:XX:SXXP) closed 1.4% higher and booked a 3% gain for the week. London’s FTSE 100 (FTSE:UK:UKX) ended 0.3% higher, for a weekly advance of 2.6%.
In Asia, the Shanghai Composite (SHG:CN:SHCOMP) finished 0.2% higher Friday but slid 0.5% for the week. Hong Kong’s Hang Seng Index (HONG:HK:HSI) rose 2.9% Friday, but remained down 0.1% for the week. Japan’s Nikkei 225 index (NIKKEI:JP:NIK) ended 0.7% higher Friday, booking a weekly gain of 0.2%.
—Barbara Kollmeyer contributed to this report.