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May 28, 2022, 4:55 a.m. EDT

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

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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 /zigman2/quotes/210598065/realtime DJIA +2.80% 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 /zigman2/quotes/210599714/realtime SPX +3.06% rose 100.40 points, or 2.5%, to finish at 4,158.24.

  • The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +3.34% 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

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
30,316.32
+825.43 +2.80%
Volume: 320.97M
Oct. 4, 2022 5:32p
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/zigman2/quotes/210599714/realtime
US : S&P US
3,790.93
+112.50 +3.06%
Volume: 2.22B
Oct. 4, 2022 5:32p
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/zigman2/quotes/210598365/realtime
US : Nasdaq
11,176.41
+360.97 +3.34%
Volume: 5.08B
Oct. 4, 2022 5:16p
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