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Mixed week on Wall Street

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2024-05-13

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A solid finish to the stock markets on Friday, but today will see a more circumspect ASX re-open.

After gaining nearly 1.6% last week to end 27.4 points higher on Friday at 7,749, the ASX 200 is looking at a small dip into the red this morning after a fall on the overnight futures platform Friday.

Wall Street ended the week mixed on Friday, though it had a good five days. Friday saw the Dow add 125.08 points, or 0.32%, to close at 39,512.84, the S&P 500 edged up 0.16%, ending at 5,222.68, while Nasdaq dipped 0.03% to end at 16,340.87.

But the week told a different story - the Dow posted a 2.16% gain for the period, its best week since December and its fourth positive week in a row. The S&P 500 and the Nasdaq Composite both posted a third consecutive winning week, rising 1.85% and 1.14%, respectively.

The strong end for the Dow was despite more evidence that US consumers have gone right off the boil, with consumer sentiment data showing not only a big uptick in inflation expectations but also a more surprising slide in confidence.

The preliminary May reading for the University of Michigan’s consumer sentiment index came in at 67.4, far below market estimates around 76 and marking its lowest reading in about six months and down from a final reading of 77.2 in April.

May’s reading, though, was still about 14% higher than a year ago, and a final figure won’t be released until the end of the month.

The consumer sentiment survey found that Americans expect inflation to stay higher over the next year at 3.5%. Before the pandemic, consumers typically expected inflation a year ahead to be below 3%.

The drop in overall consumer sentiment occurred across age, income, and education levels, the survey found.

With major retailers - led by Walmart - due to report this week and the April consumer and producer price reports, confidence among investors could take a whacking.

The S&P 500 has climbed back within 0.6% of its record on yet another round of hope that the Federal Reserve may deliver cuts to interest rates this year.

A flood of stronger-than-expected reports on profits from big US companies has also helped support the market.

Investors have been more optimistic lately after the Fed indicated the next move is unlikely to be a hike, pointing to a cap on interest rates that could be bullish for equities. Cooler employment and jobs data have also raised investor hopes in the outlook for this year.

The yield on the 10-year Treasury rose to 4.50% from 4.46% late Thursday. But the movement was small compared with its drop from 4.70% late last month.

But there’s the consumer inflation report on Wednesday to come after producer prices on Tuesday.

Offshore markets saw London’s FTSE 100 rise 0.6% after the government reported the US economy escaped recession in the first quarter with GDP up a strong 0.6%. The performance was better than expected, and it snapped two straight quarters where the economy shrank.

In Japan, Tokyo’s Nikkei index rose 0.4% after a report showed strong auto exports whittled down the nation’s trade deficit, and it racked up solid returns on overseas investments.

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