MANHATTAN (CN) — Investors remained mostly positive this week in the face of new inflation and economic growth data, with the Nasdaq finally setting a new record high.
After a week of minor gains and losses, by the closing bell Friday the Nasdaq ended up 278 points to hit 16,274 points, eclipsing its previous high point from late 2021. The S&P 500 kept its own win streak going, adding 49 points to set a new record high yet again. The Dow Jones Industrial Average lost 44 points since last Friday.
The main driver on Wall Street this week was the inflation report from the Bureau of Economic Analysis, which showed personal consumption expenditures increased by 0.3% in January. Core inflation fell slightly to 2.8% from a year ago, and the personal savings rate increased from 3.7% to 3.8%.
The data was in line with expectations, which eased worries on Wall Street after recent higher-than-forecast inflation reports and concerns that the Federal Reserve would postpone its first anticipated interest-rate cut to June or later.
“The persistence of services inflation likely pushes out the timing of that first cut,” said Jeffrey Roach, chief economist at LPL Financial. “Investors should pay close attention to the slowdown in real disposable income as a potential sign that consumers are nearing the end of their spending splurge.”
A pair of consumer confidence reports hint that Main Street expects the consumer-driven economy to slow down soon.
On Friday, the University of Michigan put out its monthly consumer confidence index, which showed a marginal decrease in sentiment as the index fell from 79 points in January to 76.9 last month. Similar drops were seen in the university’s “current conditions” and “consumer expectations” indices.
“The latest reading confirmed the remarkable improvement in consumers’ economic views that began in December 2023,” said survey Chief Economist Joanne Hsu. “Many consumers are looking ahead to the upcoming election, but at this early juncture in the election cycle, political uncertainty has yet to weight down sentiment at this time.”
Earlier in the week, the Conference Board’s own consumer confidence measure showed a similar drop in confidence, falling in February from 110.9 to 106.7.
The board’s chief economist noted the decline in consumer confidence was across the board, involving all income groups except the poorest. The index also noted that inflation was the main concern among consumers, who also are growing concerned about the U.S. labor market.
“While one month of decline has not reversed the major improvements made to sentiment recently, we do expect the index to remain subdued,” Grace Zwemmer, an analyst at Oxford Economics, wrote in an investor’s note. “Our forecast for a slowdown in consumption and slight rise in unemployment will keep a lid on sentiment.”
Also earlier in the week the BEA revised its gross domestic product reading for the fourth quarter of last year slightly down from 3.3% to 3.2%. The news was overall good for Wall Street, which wants growth to slow but not by too much.
“Our view remains that a soft landing is likely as economic conditions gently cool and inflation gradually reverts to the Fed’s 2% target,” said EY-Parthenon Senior Economist Lydia Boussour. “We see the U.S. economy growing 2.2% in 2024, partly reflecting the strong carryover from 2023, following real GDP growth of 2.5% last year.”
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Markets keep losing as inflation continues to take its toll April 19, 2024