Stocks capped a listless day of trading on Wall Street with modest gains Friday and the S&P 500’s first weekly gain in three weeks.
Gains in technology and health care companies outweighed a slide in communications stocks, retailers and elsewhere in the market. The S&P 500 rose 0.1% and notched a 1.2% gain for the week.
The benchmark index closed out the final day of trading in May with a monthly gain of 0.5%. That’s the index’s fourth straight monthly increase and follows a bumpy few weeks in the markets as investors moved past a stellar corporate earnings season and focused on the tug-of-war between the economic recovery and rising inflation.
Wall Street largely shrugged off a report indicating consumer spending increased last month, the latest economic snapshot to show inflation accelerating in the U.S. economy. Treasury yields fell, including the yield for the benchmark 10-year Treasury. Typically, worries about rising inflation fuel expectations of higher interest rates, which can cause bond yields to rise.
“It’s an indication that inflation is going to be transitory,” said Tom Martin, senior portfolio manager with Globalt Investments. “Today was just generally an up day, plus the volumes in the market have been pretty light lately, especially this week.”
The S&P 500 rose 3.23 points to 4,204.11, its third straight gain. The Dow Jones Industrial Average added 64.81 points, or 0.2%, to 34,529.45. The tech-heavy Nasdaq gained 12.46 points, or 0.1%, to 13,748.74.
Smaller company stocks, which have outperformed the broader market this year, fell. The Russell 2000 index lost 4.10 points, or 0.2%, to 2,268.97.
Inflation remains a key concern for investors, particularly if the global economic recovery is hampered if governments and central banks have to withdraw stimulus to combat rising prices. It’s partly why stocks fell two out of the past three weeks. Still, analysts expect any rise in inflation to be tied to the growing economy and will likely be more moderate.
Investors did not react harshly to the latest hotter-than-expected inflation data. The Commerce Department said Friday that personal consumption expenditures, a measure of inflation used by the Federal Reserve, rose by 3.6% in April. Excluding volatile food and energy prices, inflation was still high at 3.1%, and well above the Federal Reserve’s long-term target of inflation of around 2%.
Bond yields remained steady on the news, with the 10-year U.S. Treasury note trading at 1.58%, roughly where it’s been all week.
“You’re not seeing big spikes in rates when inflation data comes out a little high and that’s a sign of relief for the markets,” said Jamie Cox, managing partner at Harris Financial Group.
The calm rise of the market this week, steady bond yields, and a lack of a reaction to the latest inflation data signals that investors are less worried about long-term inflation issues than they were a few weeks ago. Investors also got key economic measures of GDP growth and falling unemployment this week.
An uptick in travel for the Memorial Day weekend is another signal that the economic recovery is pushing ahead. More than 1.8 million people went through U.S. airports on Thursday, and the number was widely expected to cross 2 million over the weekend. That would be the highest since early March 2020. AAA expects a 60% jump in travel over the same holiday weekend last year, with 37 million Americans traveling at least 50 miles from home, most of them in cars.
Most policymakers have said they expected some level of inflation as the U.S. economy recovers from the pandemic, helped by trillions of dollars of economic stimulus, however they expect the inflation to be temporary.
The market didn’t have much of a reaction to the White House’s unveiling of President Joe Biden’s proposed $6 trillion budget for next year. The budget, which his piled high with new safety net programs for the poor and middle class, depends on taxing corporations and the wealthy to keep the nation’s spiking debt from spiraling out of control. While only a proposal, the budget would be the highest level of spending as a segment of the economy since World War II.
Democrats control both the House and Senate, and the Senate can pass budget-related items without needing the 60-vote threshold, so it’s likely a good number of Biden’s items will make it into the final version.
Salesforce.com rose 5.4%, the biggest gain in the S&P 500, after reporting solid results for its latest quarter. Meanwhile, electronics maker HP fell 8.9% for the biggest decline in the S&P 500 after the company issued a weak full-year forecast to investors.
U.S. markets will be closed Monday for Memorial Day.