MANHATTAN (CN) — Markets continued their upward climb, as retail sales surprise and despite negative manufacturing data.
By the closing bell on Friday, the Dow Jones Industrial Average notched a new record by finishing the week up 412 points to hit 43,275 points. The S&P 500 similarly set a new record high, gaining 49 points to hit 5,864 points. The Nasdaq, which hasn’t yet beaten out its previous high point from the summer, also netted a win by adding 147 points for the week.
Overall, analysts believe the economy will achieve a “soft landing,” meaning inflation will be tamed without a recession.
“A soft landing remains, by far, the most likely outcome for the economy as important economic data strengthened across multiple fronts over the past month,” Tom Essaye of the Sevens Report wrote in an investor’s note on Friday morning.
“Now, to be clear, this doesn’t mean that a hard landing can’t happen (or won’t happen), but it is not happening right now and there are few conclusive signals that it’s going to happen, at least at this point,” he continued.
On Thursday, the monthly retail sales report by the U.S. Census Bureau showed the U.S. consumer has not yet retreated. Sales increased by 0.4%, or $714 billion, last month — larger than the 0.3% expected by most economists.
Overall, spending has increased 3% in the last 12 months, the report stated. Winners included restaurant spending, which rebounded 1% after remaining mostly flat in August, and grocery store sales saw a similar spike. Gasoline station sales fell by 1.6% due to lower gas prices.
“This is another encouraging report that confirms consumers overall are spending prudently but not retrenching thanks to resilient income momentum,” said Lydia Boussour, senior economist at EY Parthenon. She predicts consumer spending will drop next year, however, to 2% after averaging about 2.5% this year.
Stephen Brown, deputy chief North America economist at Capital Economics, also predicts a drop-off in spending in the fourth quarter due to the lingering effects of recent hurricanes.
“Some disruption from [Hurricane] Helene was clear in the weekly advance retail trade data from the Chicago Fed,” he wrote in an investor’s note. “That provides a weak handover to October, when the disruption from Hurricane Milton could compound the hit.”
The employment situation also looks better, though the effect of the hurricanes have not yet fully registered there, either.
The weekly unemployment report by the Labor Department showed 241,000 initial claims for the week ending Oct. 12 compared with the 260,000 claims filed the previous week. Continued claims rose only slightly by 9,000 for the week ending Oct. 5.
“The hurricanes that devastated swathes of the Southeast in late September and early October are going to be a big drag on releases for October,” said Bill Adams, chief economist at Comerica Bank. “That will make the economy’s underlying trend harder to read near-term.”
The two manufacturing surveys from leading Federal Reserve banks showed a muddled manufacturing sector.
After surprising experts with a positive reading in September, the October manufacturing index by the New York Fed plummeted back down to minus 11.9. However, many predict that manufacturing will improve now that interest rates are lower.
On the other hand, the Philadelphia Fed’s manufacturing survey beat expectations, coming in at 10.3 versus the 3 most analysts had forecast. This marks the second consecutive month the survey has increased and come in higher than predicted.