Spring Rally Continues as Investors Await Fed Rate Change:
Stocks saw more impressive gains last week, fueled by renewed optimism about interest rate cuts and confidence in mega-cap tech companies.
Dow 40,000
The week began quietly as market averages traded in a tight range, awaiting fresh inflation news. On Tuesday, markets rose steadily throughout the day after digesting a mixed wholesale inflation report.1
The next day, a cooler-than-expected Consumer Price Index (CPI) report sparked a broad-based rally as the upbeat news raised investors’ hopes for a rate cut. The Nasdaq Composite and Standard & Poor’s 500 (which ended above 5300 for the first time) closed the day up 1.4 percent and 1.2 percent, respectively. Meanwhile, the bellwether 10-year Treasury yield fell to 4.35 percent.2,3
Investors took a break as the week ended, mostly yawning at mixed economic data. Notably, the Dow closed just above 40,000 on Friday.
Source: Charles Schwab & Co., Inc
Inflated Expectations
With the two critical inflation updates last week, attention shifted to the Federal Reserve’s next steps with interest rates.
The top-level CPI numbers, known as headline inflation tend to be less important than what’s underneath: core inflation (CPI minus volatile food and energy prices) in the Fed’s eye. Core CPI came in at 0.29 percent for April, just below the 0.30 percent from Wall Street. It was the first time the core CPI was lower than forecasts in three months. The news revived speculation that the Fed might consider a rate adjustment as early as September.4,5
Source: Charles Schwab & Co., Inc
This Week: Key Economic Data
Source: Bloomberg Finance L.P.
This Week: Companies Reporting Earnings
Source: EarningsWhispers
At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.
Author
Gary Aiken
Chief Investment Officer
Concord Asset Management
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Footnotes and Sources
1CNBC.com, May 14, 2024
2The Wall Street Journal, May 15, 2024
3CNBC.com, May 17, 2024
4CNBC.com, May 14, 2024
5The Wall Street Journal, May 15, 2024
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