Stocks in the U.S rise ahead of Memorial Day weekend as Nasdaq scores a new high

Major U.S. stock indexes climbed, with the Nasdaq Composite reaching a new record high just before the Memorial Day weekend. The tech-heavy index was buoyed by strong quarterly earnings from Nvidia Corp. (NVDA, +2.57%), which were described as "the most important report of the week" by Anthony Saglimbene, chief market strategist at Ameriprise Financial. He noted that investors saw Nvidia's results as a clear sign that the AI industry has significant growth potential.

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Both the Nasdaq and the S&P 500 recorded their fifth consecutive week of gains, while the Dow Jones Industrial Average ended its five-week winning streak. Saglimbene attributed the positive market sentiment to a robust economy and rising corporate profits, encouraging investors to "buy the dip."

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Despite Nvidia's surge on Thursday, U.S. stocks had dropped earlier in the week due to concerns over economic data from S&P Global's flash survey of U.S. services, linked to its purchasing managers' index. The stronger-than-expected reading triggered "inflation anxiety" among investors, as inflation in the services component of the consumer-price index has been persistently high.

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Saglimbene suggested that investors may have overreacted to the economic data, which likely did not significantly alter the Federal Reserve's approach to monetary policy. "It tells you how sensitive the market is to economic data that challenges the narrative of potential Fed rate cuts this year," he said. Investors are hoping for a "Goldilocks scenario" where economic activity declines just enough to prompt rate cuts but not enough to cause major concerns.

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On Friday, U.S. stocks closed higher, with the Dow rising less than 0.1%, the S&P 500 gaining 0.7%, and the Nasdaq surging 1.1%. The Nasdaq ended the day at a record high of 16,920.79, while the S&P 500 closed at 5,304.72, just 0.3% below its record.

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Traders are now trying to assess whether the S&P 500's current level around 5,300 represents a potential ceiling or a support level for further gains. Saglimbene believes the index could climb higher, driven by positive earnings reports from U.S. companies.

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The upcoming week’s most significant economic report for stock market investors will be the April inflation reading from the personal-consumption expenditures (PCE) price index, scheduled for release on May 31. This report will be closely watched for indications of future inflation trends and their impact on Federal Reserve policy decisions.

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The U.S. stock market will be closed on Monday, May 27, in observance of Memorial Day.

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In summary, the stock market ended the week on a high note, driven by strong earnings from tech companies like Nvidia and an overall robust economic outlook. Investors remain cautious but optimistic, watching closely for inflation data and its implications for Federal Reserve actions. As the market navigates these factors, the trajectory of the S&P 500 and other major indexes will be a key focus in the weeks ahead.

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