Stock Market Update

[BRIEFING.COM] The stock market closed a winning week on a high note. The Dow Jones Industrial Average (+0.8%) was more than 300 points higher than yesterday's close and turned positive for the year (+0.3%). The S&P 500 (+0.7%) and the Nasdaq Composite (+0.5%) also closed at session highs.

The session started slow, however, with major equity indices trading near, or below, the prior closing levels. The muted moves were driven in part by a consumer sentiment report for May that was low on sentiment and high on inflation expectations. Year-ahead inflation expectations increased from 6.5% to 7.3% and the headline number sank to 50.8 from 52.2.

The preliminary May report was conducted between April 22 and May 13, which was two days after the de-escalation in the trade war with China, so it may not capture any sentiment changes resulting from the notable shift on the tariff front.

Buying picked up as the session progressed, driven by ongoing momentum and a fear of missing out on further gains. The positive skew was also helped by stocks showing early resilience to selling efforts.

Many stocks participated in upside moves, leading ten of the 11 S&P 500 sectors to close higher. Five sectors were more than 1.0% above their prior closing levels, including health care (+2.0%) and utilities (+1.4%).

Treasury yields moved up after this morning's survey data indicated higher inflation expectations. The 2-yr yield, which stood at 3.93% ahead of the 10:00 a.m. ET release, settled one basis point up from yesterday's settlement to 3.98%. The 10-yr yield, at 4.40% ahead of the release, was one basis point higher at 4.44%.

• S&P 500: +1.3% YTD
• Dow Jones Industrial Average: +0.3% YTD
• Nasdaq Composite: -0.5% YTD
• S&P Midcap 400: -1.1% YTD
• Russell 2000: -5.2% YTD

Reviewing today's economic data:

• April Housing Starts 1.361 mln (Briefing.com consensus 1.383 mln); Prior was revised to 1.339 mln from 1.324 mln, April Building Permits 1.412 mln (Briefing.com consensus 1.450 mln); Prior was revised to 1.481 mln from 1.467 mln
  • The key takeaway from the report is the weakness in single-unit permits across all regions, as it speaks to cautious-minded consumers and builders dealing with higher prices, higher mortgage rates, and higher building costs.
• April Import Prices 0.1%; Prior was revised to -0.4% from -0.1%
• April Import Prices ex-oil 0.4%; Prior was revised to -0.1% from 0.1%
• April Export Prices 0.1%; Prior was revised to 0.1% from 0.0%
• April Export Prices ex-ag. 0.1%; Prior was revised to 0.1% from -0.1%
• May Univ. of Michigan Consumer Sentiment - Prelim 50.8 (Briefing.com consensus 55.0); Prior 52.2
  • The key takeaway from the report is that it continues to reflect some deteriorating views among consumers about their personal finances and some alarming views about their inflation expectations. Note, this survey was conducted between April 22 and May 13, closing two days after the U.S.-China tariff de-escalation news, so it doesn't capture the full consideration of that pleasing news.

Looking ahead to next week, market participants receive some data on the labor market and on the housing market. Weekly jobless claims are out Thursday morning, along with April Existing Home Sales, and April New Home Sales are out Friday morning.