S&P 500, Nasdaq Rise to Finish the Week

Technology stocks propelled the S&P 500 higher, concluding a tumultuous week in the markets. Both the broad U.S. stock index and the tech-centric Nasdaq Composite extended their gains for the fifth consecutive week, while the Dow Jones Industrial Average ended its winning streak that had persisted since mid-April.

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In Saturday's trading, the S&P 500 rose by 0.7%, and the Nasdaq surged by 1.1% to reach a new record high. The Dow, however, increased by less than 0.1%, or about 4 points.

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Looking ahead, many investors remain optimistic. Recent inflation reports had exceeded expectations, but the April consumer price report provided some reassurance, indicating that the economy remains resilient despite the Federal Reserve's aggressive measures to combat inflation. Contrary to fears that the Fed’s actions might lead to a recession, the economic outlook remains strong.

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Corporate profit forecasts further bolster this optimism. Analysts predict that earnings for companies in the S&P 500 will grow by 11% this year and by 14% in 2025, according to FactSet. Nancy Tengler, CEO and CIO of Laffer Tengler Investments, expressed confidence in the market's prospects, stating, “If the Fed stays higher for longer, that doesn’t necessarily mean that stocks won’t continue to perform. I do believe we’re in a bull market and I think it’s pretty early.”

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Nonetheless, some investors are cautious about potential volatility ahead, particularly if inflation does not consistently decrease. The University of Michigan's survey data revealed that inflation expectations rose slightly from the previous month, remaining above pre-pandemic levels. Andrew Slimmon, head of the applied equity advisors team at Morgan Stanley Investment Management, warned, “We’ve gotten too cheerful in the expectation that inflation is just going to continue to come down and the Fed’s going to cut. If we get inflation numbers that challenge that thesis, I think the market is going to struggle.”

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Earnings reports sparked significant movements in individual stocks on Friday. Intuit's shares fell by 8.3% after the company reported a decline in the number of users of its TurboTax product. Conversely, Deckers Outdoor saw its shares jump by 14% following better-than-expected sales and profit forecasts for its Ugg boots and Hoka shoes. Ross Stores’ shares increased by 7.8% after the retailer reported stronger-than-anticipated earnings and sales.

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Chip giant Nvidia continued its upward trajectory, rising by 2.6% and building on a record set the previous day after a strong earnings report.

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Government bond yields rose over the week. The yield on the benchmark 10-year U.S. Treasury note increased to 4.471% on Friday, up from 4.419% a week ago, though it ticked down slightly from Thursday. Yields move inversely to prices.

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On the international front, major stock indexes mostly declined on Friday. The Stoxx Europe 600 fell by 0.2%, while Japan’s Nikkei 225 dropped by 1.2%.

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Overall, while technology stocks and strong corporate earnings have provided a boost to the U.S. stock market, ongoing inflation concerns and the potential for future market volatility remain key factors for investors to watch.

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