Home| Technology| About| Customer Support| Leave a Review| Request Demo| Login
Gallery inside!

The U.S. Economy Defies Recession Fears As Latest Data Show Stocks Are Soaring

May 26, 2023
minute read

U.S. stocks commenced the trading day with gains on Friday, bolstered by a series of positive economic data indicating a robust state of U.S. consumption and manufacturing. However, Treasury yields rose in response to evidence of persistently elevated inflation.

The Dow Jones Industrial Average rose by 204 points, or 0.6%, reaching 32,974, while the S&P 500 gained 23 points, or 0.6%, to reach 4,174. The Nasdaq Composite also experienced an increase of 101 points, or 0.8%, reaching 12,799. Notably, the Nasdaq Composite witnessed its largest gain in three weeks on Thursday, primarily driven by a historic surge in the shares of chipmaking giant Nvidia Corp. Conversely, the Dow Jones Industrial Average concluded lower for the fifth consecutive session.

The stock market's upward trajectory on Friday was driven by positive sentiment in response to a range of economic data demonstrating that the U.S. economy continues to defy expectations of an imminent recession. Notably, Personal Consumption Expenditures (PCE) data revealed a significant rebound in consumer spending during April, with a 0.8% increase, the largest gain in three months. This surpassed expectations of a 0.5% increase, attributed to increased car purchases and higher spending on services.

Furthermore, durable-goods data indicated a 1.1% surge in orders for U.S. manufactured goods in April, primarily driven by military spending but also accompanied by a notable increase in business investment.

While the PCE price index showed a 0.4% rise in core inflation in April, exceeding economists' expected increase of 0.3%, traders appeared willing to overlook slightly higher-than-anticipated inflation due to indications of a robust U.S. economy. Recent Gross Domestic Product (GDP) data, released earlier in the week, showed a stronger-than-expected 1.3% growth rate for the U.S. economy in the first quarter.

Rubeela Farooqi, Chief U.S. Economist at High Frequency Economics, acknowledged that inflation appeared to be moving "in the wrong direction" at the beginning of the second quarter.

Additionally, the stock market continued to benefit from the momentum generated by a surge in technology stocks on Thursday, driven by Nvidia's optimistic outlook for second-quarter sales fueled by artificial intelligence. Nvidia's shares rose by more than 24%, adding nearly $200 billion to the company's market capitalization, representing one of the largest one-day increases in the history of corporate America.

Another microchip manufacturer, Marvell Technology, experienced gains on Friday as well, with the company highlighting the emergence of artificial intelligence as a growth driver.

Market sentiment was also influenced by reports indicating that Congress was nearing a deal to raise the U.S. debt ceiling, although House Republicans had already left Washington ahead of the U.S. Memorial Day holiday weekend.

While Treasury Secretary Janet Yellen warned of a potential depletion of funds as early as June 1, other projections suggested that the federal government might have until the middle of the month.

"I think we'll all be able to exhale by mid-June, although it will likely be an increasingly volatile market environment between now and then," stated Kristina Hooper, Chief Global Market Strategist at Invesco. "Once that drama recedes, I think all eyes will be back on central banks."

Cathy Hills
Associate Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

Subscribe to our newsletter!

As a leading independent research provider, TradeAlgo keeps you connected from anywhere.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Related posts.