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Financial Markets 05/31 15:50
NEW YORK (AP) -- An already verdant May for Wall Street finished with
another push higher as stocks rallied Friday after a report showed inflation is
at least not worsening.
The S&P 500 rose 0.8% to close its sixth winning month in the last seven.
The main measure of the U.S. stock market's health set an all-time high late in
the month after clawing back all its losses from a rough April.
The Dow Jones Industrial Average jumped nearly 575 points, or 1.5%, while
sagging prices for some big technology stocks held back the Nasdaq composite.
It slipped by less than 0.1%.
Gap soared to one of the market's biggest gains, 28.6%, after delivering
stronger profit and revenue for the latest quarter than analysts expected. The
parent company of Old Navy and Banana Republic reported growth across its
brands, reversing earlier declines at most of them. The retailer also raised
its forecasts for sales and profitability this year despite saying the outlook
for the economy remains uncertain.
Stocks broadly got a boost from easing Treasury yields in the bond market
after the latest reading on inflation came in roughly as expected. That left
open the question of when Wall Street will get the lower interest rates that it
craves.
The report showed a key measure of inflation remained at 2.7% last month,
exactly as forecast. Some underlying trends also improved by a touch more than
expected. That could bolster confidence at the Federal Reserve that inflation
is sustainably heading toward its target of 2%, something it says it needs
before it will cut its main interest rate.
The Fed has been keeping the federal funds rate at the highest level in more
than 20 years in hopes of slowing the economy enough to stifle high inflation.
But if it holds rates too high for too long, it could choke off the economy's
growth and cause a recession that throws workers out of their jobs and craters
profits for companies.
"The pickle for the Fed is whether growth will slow faster than inflation,"
said Brian Jacobsen, chief economist at Annex Wealth Management. "We've gone
from great growth to slower growth pretty quickly. The road to lower inflation
has been like a joyride so far, but the last mile will be more challenging."
Friday's report from the U.S. government showed that growth in spending by
consumers weakened by more than economists expected. Growth in incomes for
Americans also slowed last month.
Such numbers show businesses "need to prepare for an environment where
consumers are not splurging like they were last year," according to Jeffrey
Roach, chief economist for LPL Financial.
After the report, the yield on the 10-year Treasury fell to 4.50% from 4.55%
late Thursday. It had topped 4.60% earlier in the week amid worries about tepid
demand following some auctions for Treasurys, a move that had hurt stocks.
The two-year Treasury yield, which more closely tracks expectations for Fed
action, slipped to 4.87% from 4.93% late Thursday.
Virtually no one expects the Federal Reserve to cut interest rates at its
next meeting in a week and a half. But traders are betting on a nearly 85%
probability that the Fed will cut at least once by the end of the year,
according to data from CME Group.
Stocks in industries that tend to benefit the most from easier interest
rates helped lead the market Friday. Real-estate stocks in the S&P 500 jumped
1.9% as a group for one of the biggest gains among the 11 sectors that make up
the index. Boston Properties rose 4.3%.
On the losing end of Wall Street were several tech stocks.
Dell tumbled 17.9% even though it matched analysts' forecasts for profit in
the latest quarter. Its stock had already soared 122% in 2024 ahead of the
report, meaning expectations were very high, and analysts pointed to concerns
about how much profit Dell is squeezing out of each $1 in revenue.
Nvidia fell for a second straight day, losing 0.8%, as its momentum finally
slows after soaring more than 20% since its blowout profit report last week.
The chip company was one of the heaviest weights on the S&P 500 Friday. But its
soaring profits and ability to keep a frenzy going on Wall Street for the
entire artificial-intelligence technology industry were also huge reasons for
the index's 4.8% gain for May.
Trump Media & Technology Group slumped 5.3% in its first trading following
the conviction of Donald Trump on felony charges Thursday. The company, which
runs the Truth Social platform, had warned earlier in filings with U.S.
securities regulators that a conviction of Trump could hurt it.
MongoDB dropped 23.9% despite topping forecasts for profit and revenue. The
database company for developers gave forecasts for profit in the current
quarter and for this full year that fell short of analysts' expectations.
All told, the S&P 500 rose 42.03 points to 5,277.51. The Dow leaped 574.84
points to 38,686.32, and the Nasdaq slipped 2.06 to 16,735.02.
In stock markets abroad, indexes were mixed across Asia and Europe.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
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