Weak figures could set the stock market up for more gains this month
Wall Street stocks closed mostly higher on Friday, inching closer to record highs amid a series of strong profit reports. At the same time, gains were capped by a disappointing report on US consumer sentiment that suggested households are raising their inflation expectations. As such, the S&P 500 rose 0.2%, the Dow Jones gained 0.3%, and the Nasdaq Composite edged down by less than 0.1%.
For the week, the S&P 500 was up 1.9%, the Dow added 2.2%, and the Nasdaq gained 1.1%. This week, investors will be focused on the Wednesday release of April’s inflation report. Weak figures could set the stock market up for more gains this month.
According to forecasts, the CPI likely rose 3.4% over the year in April, compared to a 3.5% increase in March. Prices have risen faster than expected for the first three months of the year, forcing the Federal Reserve to delay cutting its benchmark interest rate. Inflation in line with forecasts would leave the Fed unlikely to cut that rate before December. Besides, rising gasoline prices last month likely fueled inflation to remain stubbornly high.
However, core inflation, which excludes volatile prices for food and energy, likely rose 0.3% over the month, down from 0.4% in March. If so, the dollar would ease across the board in the aftermath of the release, while risky assets including stocks would gain.
The USD index finished higher on Friday to see modest weekly gains after steep losses witnessed during the previous week. The greenback has settled around 105.30, off weekly highs seen around 105.75 earlier. On the downside, the nearest support is now represented by the 105.00 figure that remains in focus while below the 105.90 zone.
