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The market got a bit of a boost Friday from a report showing overall sentiment among US consumers weakened by less in May than preliminary data had suggested. Perhaps more importantly, the report from the University of Michigan also said US consumers’ expectations for inflation in the coming year rose by less in May than earlier feared.
That could help stave off a vicious cycle where high expectations for inflation among US households drive them to behave in ways that only make inflation worse.
Worries about stubbornly high inflation were behind this week’s rocky trading, after indexes set records recently. The weakness began after the Federal Reserve on Wednesday released the minutes from its last policy meeting. It showed some officials talking about the possibility of raising rates if inflation worsens.
Stocks fell further after reports on Thursday indicated the US economy is stronger than expected. Such strength can actually spook Wall Street because it could keep upward pressure on inflation.
That in turn could at least delay the Federal Reserve from giving relief to financial markets through cuts to its main interest rate, which is sitting at the highest level in more than 20 years. The Fed is trying to pull of the difficult feat of slowing the economy enough through high interest rates to stifle high inflation but not so much that it kneecaps the job market.
Goldman Sachs economist David Mericle pushed back his forecast for the Fed’s first cut to rates to September from July, in part due to Thursday’s reports on US business activity and joblessness.
Treasury yields climbed this week on such concerns, but they were mostly stable Friday following the report on consumer sentiment. The yield on the 10-year Treasury slipped to 4.46 per cent from 4.48 per cent late Thursday. The two-year yield, which more closely tracks expectations for action by the Fed, was holding steady at 4.94 per cent.
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This week’s bumpiness for stocks came despite another blowout profit report from Nvidia, which has rocketed to become one of Wall Street’s most influential stocks amid a frenzy around artificial-intelligence technology. Fervour around AI had pushed some stocks to heights that critics called overdone, but Nvidia’s eye-popping growth and forecasts for more suggest it could keep going.
Nvidia rose another 2.6 per cent Friday, making it the biggest single force pushing the S&P 500 upward.
Elsewhere on Wall Street, Workday fell 15.3 per cent despite reporting stronger profit for the latest quarter than analysts expected. The company, which helps businesses manage their people and money, gave a forecast for upcoming subscription revenue that fell a bit short of Wall Street’s estimates.
In stock markets abroad, indexes fell across much of Asia and Europe. Indexes sank 1.4 per cent in Hong Kong, 1.3 per cent in Seoul and 1.2 per cent in Tokyo.
AP
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