BY EMMANUEL OGBONNA
U.S. stocks climbed Friday, extending a powerful rally that has now carried Wall Street through its eighth consecutive winning week, even as American consumers expressed growing anxiety over inflation, rising oil prices and the broader direction of the economy.
The divergence between investor optimism and household pessimism became increasingly pronounced throughout the trading session, with major indexes moving closer to record territory despite fresh data showing consumer sentiment sinking to historic lows.
The benchmark rose 0.8% in afternoon trading, continuing its advance toward the all-time high reached last week. The gained roughly 492 points, or 1%, while the tech-heavy added 0.7%.
The latest gains reflected continued confidence among investors that corporate America remains resilient despite geopolitical turmoil, elevated interest rates and mounting inflation concerns tied to the ongoing conflict involving Iran.
Retail and technology shares helped fuel Friday’s rally after a new wave of earnings reports exceeded analysts’ expectations.
surged 6.9% after the discount retailer posted quarterly profit and revenue that comfortably beat Wall Street forecasts. Company executives said customer traffic remained strong throughout the quarter, with shoppers continuing to seek bargains amid economic uncertainty.
Chief Executive Jim Conroy noted that consumer spending may also have been supported by tax refund checks, helping lower- and middle-income shoppers maintain purchases despite persistent inflation pressures on essentials such as food, gasoline and housing.
Beauty giant jumped 10.1% after announcing it was no longer pursuing a potential merger with Spanish fragrance and beauty company . Investors appeared relieved that the company would avoid a potentially complicated international deal at a time when borrowing costs remain elevated and financial conditions uncertain.
Software firms also contributed to market momentum. climbed 5.6% after reporting stronger-than-expected quarterly profits, while soared 11% following upbeat earnings results that surpassed analyst forecasts.
The strong corporate earnings season has become a major support for U.S. equities in recent months. Analysts say steady profit growth among major companies has helped offset investor concerns surrounding inflation, global conflicts and uncertainty over future Federal Reserve policy.
Over the longer term, stock prices tend to follow the trajectory of corporate earnings, and investors have increasingly focused on resilient business performance rather than weakening consumer confidence.
Still, Friday’s gains came against a troubling backdrop for the broader U.S. economy.
A closely watched survey released by the showed consumer sentiment falling to its weakest level on record, dropping below even the lows recorded in 2022 when inflation in the United States surged above 9%.
The deterioration reflected growing concern among households over the economic impact of higher energy prices caused by the conflict involving Iran and disruptions to global oil markets.
According to the survey, Americans now expect inflation to rise to 4.8% over the next 12 months, slightly higher than last month’s 4.7% forecast. Longer-term inflation expectations also climbed sharply, rising to 3.9% from 3.5%.
Economists closely monitor inflation expectations because they can influence consumer and business behavior. When households believe prices will continue rising rapidly, workers may demand higher wages and businesses may raise prices more aggressively, potentially creating a self-reinforcing inflation cycle that becomes harder for policymakers to control.
The decline in sentiment was particularly severe among lower-income households, which are more vulnerable to rising prices for gasoline, groceries and other basic necessities. The survey also showed sentiment weakening among Republican voters, underscoring how inflation concerns have spread across political and demographic groups.
Energy markets remained volatile throughout the week, adding to uncertainty across financial markets.
Oil prices swung sharply again Friday amid continued speculation over whether the United States and Iran could eventually reach an agreement allowing the reopening of the Strait of Hormuz, a vital global shipping route for crude oil exports.
The strategic waterway’s closure has disrupted the movement of oil tankers from the Persian Gulf, intensifying concerns over global energy supplies and driving up fuel prices worldwide.
International benchmark Brent crude rose 0.6% to $100.09 per barrel, remaining above the psychologically important $100 threshold. Meanwhile, benchmark U.S. crude fell 1.3% to $95.08 per barrel after fluctuating heavily during the session.
The surge in oil prices has contributed to rising government bond yields around the world as investors brace for prolonged inflation and tighter monetary conditions.
Higher bond yields can weigh heavily on financial markets because they increase borrowing costs for households and businesses while making safer fixed-income investments more attractive compared with stocks and cryptocurrencies.
The rise in yields has already pushed average long-term U.S. mortgage rates to their highest levels since last summer, increasing pressure on the housing market. Economists also warn that elevated borrowing costs could slow corporate investment, including financing for artificial intelligence data centers that have been a major engine of recent U.S. economic growth.
Treasury yields fluctuated Friday as investors reacted to shifting oil prices and the University of Michigan survey data.
The yield on the 10-year U.S. Treasury note briefly rose after oil prices recovered earlier losses and inflation expectations worsened, though it later eased slightly to 4.56% from 4.57% late Thursday. Even so, the yield remains significantly above the 3.97% level seen before the outbreak of the Iran conflict.
Concerns about inflation have now grown strong enough that traders have largely abandoned expectations for Federal Reserve interest rate cuts later this year.
Investors increasingly believe the central bank may be forced to keep borrowing costs elevated for longer than previously anticipated in order to prevent inflation from accelerating again.
reinforced that caution during a speech Friday, warning that the Fed would act aggressively if inflation expectations became unstable.
“If I believe inflation expectations start to become unanchored, I would not hesitate to support an increase in the target range for the federal funds rate,” Waller said in remarks titled “Policy Risks Have Changed.”
At the same time, Waller emphasized that such conditions have not yet materialized and suggested the central bank should remain patient while monitoring developments in global markets and the economy.
“It is time to simply sit and watch how the conflict and the data evolve,” he said.
Global stock markets also advanced Friday, with gains spreading across much of Europe and Asia.
In Japan, the surged 2.7% to another record high after new economic data showed Japanese inflation slowing to a four-year low of 1.4% in April despite higher global energy prices linked to the Middle East conflict.
Original article
Comments