U.S. stocks rebounded on Friday, recovering from the previous day’s sharp losses, bolstered by optimistic consumer inflation expectations and robust economic data. The Nasdaq Composite recorded its fifth consecutive week of gains, closing at a new record high.
The Commerce Department reported that new orders for key U.S.-manufactured capital goods rebounded more than anticipated in April. Additionally, the University of Michigan’s latest data revealed an improvement in consumer inflation expectations in late May, following an earlier decline.
Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, commented on the positive market sentiment: “The data has come in a little better than people thought this morning. Durable goods was a pretty solid number. … And then consumer sentiment, not great, but not bad, better than people expected.” He added, “This is a bounce where people are like maybe things aren’t as bad as we thought, maybe there’s room for the Fed to cut rates and the economy’s going to be OK, and we’re not completely falling apart.”
By the close of trading, the Dow Jones Industrial Average had edged up 4.33 points, or 0.01%, to 39,069.59. The S&P 500 gained 36.88 points, or 0.70%, to 5,304.72, and the Nasdaq Composite advanced 184.76 points, or 1.10%, to 16,920.79.
Despite the gains on Friday, the Dow ended the week down 2.34%, breaking a five-week winning streak. Meanwhile, the S&P 500 edged up 0.03%, and the Nasdaq rose 1.41% for the week.
Thursday’s market drop was driven by economic data indicating rising price pressures, which tempered expectations for Federal Reserve rate cuts this year. This negative sentiment overshadowed the strong quarterly results from Nvidia, which had buoyed investor confidence in growth for AI-related stocks.
Among the S&P sectors, communication services performed the best, gaining 1.29%. Both tech and utilities sectors also saw gains of around 1%.
Market participants are currently pricing in a 49.4% chance of a rate cut at the Fed’s September meeting, down from 54.8% a week ago, according to the CME’s FedWatch Tool. Goldman Sachs has adjusted its forecast, now predicting the first rate cut will occur in September rather than July.
Small-cap stocks, which are particularly sensitive to interest rate changes, also rebounded, with the Russell 2000 rising 1.04% after a 1.6% drop on Thursday.
In corporate news, Workday’s shares plunged 15.33% after the HR software provider cut its annual subscription revenue forecast. Conversely, Ross Stores saw a 7.89% rally after exceeding first-quarter earnings estimates and raising its annual profit forecast.
As the earnings season wraps up, 77.9% of the 480 companies in the S&P 500 that have reported so far have exceeded analysts’ expectations, according to LSEG data. This beat rate is just shy of the 79% average over the past four quarters but remains above the long-term average of 67% since 1994.
Advancing issues outnumbered decliners by a 2.91-to-1 ratio on the NYSE and by a 1.85-to-1 ratio on the Nasdaq. The S&P index recorded 28 new 52-week highs and six new lows, while the Nasdaq Composite noted 68 new highs and 114 new lows.
Trading volume on U.S. exchanges was 10.36 billion shares, compared to the 12.22 billion average over the last 20 trading days.
As markets adjust to new economic data and corporate earnings reports, investors continue to watch for signs of stability and growth amid a landscape of mixed signals and cautious optimism.