MANHATTAN (CN) — No news was good news this week for Wall Street, which has recouped much of the value lost in April as investors await key inflationary data next week.
The Dow Jones Industrial Average, which has sustained an eight-day winning streak, closed out the week up 837 points, while the S&P 500 gained 95 points and the Nasdaq rose 184 points.
A relatively barren economic calendar kept investors focused mainly on earnings reports, which have mostly met or exceeded expectations.
James Meyer at Tower Bridge Advisors noted most companies this week predicted slower growth in the months to come, but few predicted recession and most said they could handle any slowdown. “The earnings announcements encouraged investors, stemmed the market correction, and left investors in a reasonably good mood,” he wrote in an investor’s note.
Besides earnings, economic data was scant this week. The preliminary consumer sentiment reading from the University of Michigan on Friday noted a slight uptick in inflationary expectations and a sharp drop in consumer confidence for the month, from 67.4 to 77.2.
The report noted the decline in confidence was “statistically significant” and was seen across all demographics. The report also noted consumers had a bleaker outlook on interest rates.
Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance, called the lower-than-expected consumer sentiment reading is “a warning sign that the consumer shouldn’t be taken for granted” and that it could influence the Federal Reserve’s decision on interest rates.
“If spending slows down and inflation increases, we’ll get the opposite of the Goldilocks scenario that many were hoping for, and the Fed will be in an especially difficult position of choosing between accommodating a slowing economy and fighting increasing inflation expectations,” he said.
Others cautioned not to read too much into the preliminary report. In a tweet, Ian Shepherdson, chief economist at Pantheon Macroeconomics, called the report “no big deal” and noted the University of Michigan is switching its survey methodology to web-based from phone interviews, and that online respondents tend to have higher inflationary expectations.
Michael Pearce, deputy chief U.S. economist at Oxford Economics, wrote in an investor’s note that “consumer confidence is volatile on a month-to-month basis and has not been an important driver of consumer spending in recent years.”
Pearce also said the new survey methodology could be to blame, noting that when the Conference Board changed its own methodology a few years ago the index saw a jump in results.
The only other notable economic news came from the Labor Department, which reported 231,000 initial unemployment claims for the week ending May 4 — the most since August 2023. Continuing claims also bumped up following three straight declines, increasing 17,000 to hit 1.78 million for the week ending April 27, the highest mark since late 2021.
The weekly report has been non-news for a while, but the uptick in claims raised some eyebrows among investors even as analysts say the numbers should not be worrisome yet.
“If claims remain at the latest week’s level or rise further, it would be a clear sign of a further loosening in labor market conditions,” economist Nancy Vanden Houten from Oxford Economics wrote in an investors’ note. “For now, though, claims remain below the level that would signal a major weakening in the job market.”