Stocks Surge as Economic Data Boosts Wall Street Sentiment
Stocks rallied during a quiet week on Wall Street, with the Nasdaq Composite rising just under 1% and the S&P 500 popping almost 2%. The S&P 500 closed back above 5,200 for the first time since early April, while the Dow Jones Industrial Average rose more than 2% and closed higher for eight straight sessions.
Looking ahead, the economic calendar for the week includes a crucial April inflation reading, an update on retail sales, and initial jobless claims. The April Consumer Price Index (CPI) is expected to show an annual gain of 3.4% for headline CPI, with prices set to rise 0.4% on a month-over-month basis. Core inflation is expected to have risen 3.6% year over year, with monthly core price increases at 0.3%.
Morgan Stanley’s economics team believes that inflation’s descent could begin with the April CPI report, which could keep three Fed interest rate cuts on the table this year. This potential easing of inflation could be positive for stocks, according to Fundstrat’s head of research Tom Lee.
On the corporate side, Walmart, Home Depot, and Alibaba lead a quieter week of quarterly reports as earnings season slows down. With 92% of the S&P 500 done reporting first-quarter earnings, the index is pacing for its highest year-over-year earnings growth since the second quarter of 2022.
However, the stock market’s reaction to economic data has been mixed, with recent hot inflation data causing some skittishness among investors. The correlation between the S&P 500 and economic surprise has headed toward negative territory, suggesting that good economic news may not necessarily be positive for the market.
In the week ahead, investors will be closely watching the April retail sales report, as well as earnings from companies like Cisco, Walmart, and Under Armour. The market will also be paying attention to economic data such as initial jobless claims, housing starts, and industrial production.
Overall, the week ahead promises to be an eventful one for Wall Street, with key economic data releases and corporate earnings reports shaping market sentiment. Stay tuned for more updates on how these developments impact stock prices and investor sentiment.