Markets Finally Snap Losing Streaks…..

U.S. equities finished higher, with the S&P 500 notching its first weekly gain Since April 1st, and the Dow recording its first in nine weeks. The personal income and spending report showed that both continued to rise, but it also included some signs of moderation in inflation, which appeared to offer the markets a bit of a reprieve. The string of weekly declines had come amid increased aggressiveness by the Fed to try to combat inflation, which has also fostered recession chatter to ramp up. Meanwhile, the markets continued to grapple with the ongoing war in Ukraine and the disruption from the COVID-induced lockdowns in China. The retail sector continued to put the finishing touches on earnings season, with Costco Wholesale topping revenue forecasts but its profit margins disappointed, and Gap posting a larger-than-expected loss and issuing lackluster guidance, but Ulta Beauty bested expectations and raised its outlook. The markets appeared to shrug off a fresh decade low in consumer sentiment, which was bogged down by a drop in expectations amid inflation worries. Treasuries were higher, pressuring yields, and the U.S. dollar declined, while crude oil prices were higher, and gold gained modest ground. Europe finished higher, with all the major markets posting solid weekly gains, and Asia closed out the week positively as earnings boosted Hong Kong markets.

The Dow Jones Industrial Average rose 576 points (1.8%) to 33,213, the S&P 500 Index gained 100 points (2.5%) to 4,158, and the Nasdaq Composite added 390 points (3.3%) to 12,131. In moderate volume, 4.3 billion shares of NYSE-listed stocks were traded, and 4.7 billion shares changed hands on the Nasdaq. WTI crude oil moved $0.98 higher to $115.07 per barrel. Elsewhere, the gold spot price was up $3.40 to $1,851.00 per ounce, and the Dollar Index lost 0.2% at 101.68. Markets were solidly higher for the week, as the DJIA advanced 6.2%, the S&P 500 increased 6.6%, and the Nasdaq Composite jumped 6.8%.

Personal income and spending data remains positive, consumer sentiment continues to drop…..

Personal income rose 0.4% month-over-month (m/m) in April, slightly below the Bloomberg consensus forecast calling for it to match March’s unrevised 0.5% increase. Personal spending grew 0.9%, north of expectations of a 0.8% increase, and compared to the prior month’s upwardly-adjusted 1.4% gain. The April savings rate as a percentage of disposable income was 4.4%, down from March’s negatively-revised 5.0% rate.

The PCE Deflator was up 0.2% m/m, matching expectations, and following March’s unadjusted 0.9% rise. Compared to last year, the deflator was 6.3% higher, above estimates of a 6.2% increase, but below the prior month’s unadjusted 6.6% gain. Excluding food and energy, the PCE Core Price Index rose 0.3% m/m, in line with expectations and March’s unrevised gain. The index was 4.9% higher y/y, matching estimates and down from March’s unrevised 5.2% rise.

The May final University of Michigan Consumer Sentiment Index was revised unexpectedly to 58.4, from the preliminary 59.1 figure, where it was expected to remain. The downward revision came as both the expectations and current conditions portions of the survey were adjusted to the downside, with the former dropping solidly. The overall index was below April’s 65.2 level and hit the lowest level since August 2011 as both current conditions and expectations were down sharply m/m. The 1-year inflation forecast was revised lower to 5.3% from the preliminary estimate which had it matching the prior month’s 5.4% rate, while the 5-10 year inflation forecast remained at 3.0% for the fourth-straight month.

The disappointing report came as consumers continued to have a negative view on current buying conditions for houses and durable goods, along with their outlook for the economy, primarily driven by concerns about inflation.

The advance goods trade balance showed that the April deficit narrowed more than expected to $105.9 billion, versus estimates calling for it to contract to $114.9 billion from March’s upwardly-revised shortfall of $125.9 billion.

Preliminary wholesale inventories rose 2.1% m/m for April, compared to expectations of a 2.0% gain, and versus March’s upwardly-revised 2.7% increase.

Treasuries were higher, and yields have been choppy as of late as markets anticipate tighter Fed monetary policy amid the backdrop of persistent inflation and signs of slowing economic growth.

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