Wall Street breaks 7-week losing streak — longest since 2001
Stocks rose on Wall Street Friday and closed higher for the week, breaking a seven-week losing streak, the longest such stretch since 2001.
The S&P 500 rose 100 points, or 2.5%, to close at 4,158, increasing its gain for the week to 6.6%. That's the biggest weekly gain for the benchmark index since November 2020. Technology stocks were a big factor pushing the market higher. That sent the Nasdaq composite up 3.3%. The Dow Jones Industrial Average rose 1.8%.
The gains were broad, led by technology stocks. Apple rose 3.3% and Microsoft rose 1.8%. Retailers also made solid gains as Wall Street continues reviewing the latest round of earnings to get a better sense of just how much pain rising inflation is inflicting on businesses and consumers. Beauty products company Ulta Beauty surged 10.3% after raising its profit forecast for the year. Amazon rose 2%.
Inflation cresting?
Investors received potentially encouraging news about inflation. The Commerce Department said that inflation rose 6.3% in April from a year earlier, the first slowdown since November 2020 and a sign that high prices may finally be moderating, at least for now.
That added to other recent signs showing that while high inflation may be moderating. Another key inflation gauge, the Consumer Price Index, rose 8.3% from a year ago, down from 8.5% in March — the first slowdown in inflation in nine months.
The report was released as Wall Street looks for any signal that inflation could be easing, while trying to figure out just how low stocks might sink.
"At this point that's all the market needs," said Ross Mayfield, investment strategy analyst at Baird. "It's definitely one of the signs you would want to see."
The broader market has been in a slump for nearly two months as concerns about inflation and rising interest rates pile up. Investors were spooked last week by disappointing reports from key retailers, including Walmart and Target, which stoked fears about rising inflation hitting profit margins and crimping consumer spending.
Trading remained choppy throughout the week, though the market has mostly pushed higher, as retailers including Macy's and Dollar General released encouraging earnings reports and financial updates.
Inflation is at a four-decade high and has been persistently squeezing businesses. Higher costs prompted companies to raise prices on everything from food to clothing to protect their margins and consumers remained resilient. Russia's invasion of Ukraine worsened the inflation picture by pushing global energy and food prices even higher.
U.S. crude oil prices were relatively stable, but are up more than 50% in 2022. Wheat prices are up about 50% and corn prices are up 30% this year.
The extra inflation squeeze has made it even more difficult for businesses to offset costs and is seemingly prompting a shift in consumer spending away from expensive items and toward necessities. It has also raised concerns that the Federal Reserve may have an even more difficult time trying to temper the impact from inflation.
The Fed is aggressively raising interest rates to fight inflation, but investors are worried that it could potentially push the economy into a recession if it moves too aggressively.
"Amid rising pessimism about the state of the U.S. consumer, today's report provides some reassurance that the main pillar of the economy is still standing strong in the face of historic inflation and rising borrowing costs," Lydia Boussour, lead U.S. economist with Oxford Economics, said in a report on the latest spending and inflation data. "But a bumpy road lies ahead for the U.S. economy, which we expect will slow markedly heading into 2023."