U.S. stocks rose on Friday, bouncing back from Wall Street's worst day since April.
The S&P 500 rose 36.88 points, or 0.7%, to 5,304.72, clawing back all of the losses from the previous two days, and is up only slightly this week, extending its weekly gain to five and remaining just below the record high recorded on Tuesday.
The Dow Jones Industrial Average rose 4.33 points, or less than 0.1 percent, to 39,069.59, while the Nasdaq Composite rose 184.76 points, or 1.1 percent, to 16,920.79, surpassing the all-time high it set earlier this week.
Deckers Outdoor Co. reported better-than-expected profits and revenues for its latest quarter, rising 14.2% to become the biggest gainer in the S&P 500. The company, which owns the Hoka, Ugg and Teva brands, also gave earnings guidance for next year that was in line with analysts' expectations.
Ross Stores Inc. also boosted the market, soaring 7.8% after the company reported profits for its latest quarter that beat analysts' expectations. Revenue was only slightly ahead of expectations as customers continue to cut back on non-essential purchases, but profits still rose.
“Several challenges, including persistent inflation, continue to weigh on the purchasing power of our low- to moderate-income customers,” CEO Barbara Rentler said in a statement.
While overall, or macroeconomic, data points to continued strength in U.S. household spending, the numbers below the surface may not be so encouraging.
“Walmart and Target are saying that higher-income consumers are doing well, but they're starting to shop less,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Lower-income consumers are struggling. Macroeconomics is often too focused on averages, and the averages are skewed by higher-income households.”
On Friday, markets were slightly higher following a report that overall sentiment among U.S. consumers in May was not as weak as preliminary data had suggested. Perhaps more importantly, the University of Michigan report also stated that U.S. consumers' inflation expectations for the year ahead did not rise as much in May as initially feared.
Doing so could help stave off a vicious cycle in which American households' inflation expectations rise and they take actions that only make inflation worse.
Concerns about persistently high inflation were behind this week's volatile trading after the index recently hit a record high. The weakness began after the Federal Reserve released minutes from its last policy meeting on Wednesday, which showed some officials talking about potentially raising interest rates if inflation worsens.
Stocks fell further after reports on Thursday showed the U.S. economy performing better than expected. Such strength could really spook Wall Street, as it could keep up upward pressure on inflation.
That would at least delay the Federal Reserve's decision to cut its key interest rate, which is at its highest in more than two decades, to rescue financial markets as it tries to navigate the tricky task of keeping inflation at bay while slowing the economy enough not to crush the job market.
Goldman Sachs economist David Mericle pushed back his forecast for the Fed's first rate cut from July to September, following Thursday's reports on U.S. business activity and the unemployment rate.
Those concerns sent Treasury yields higher this week but were roughly flat on Friday following the report on consumer sentiment. The 10-year Treasury yield fell to 4.46% from 4.48% late Thursday. The 2-year yield, which better reflects expectations of Fed action, was flat at 4.94%.
The stock's volatility this week came despite a stunning new profit report from Nvidia, which has catapulted the company into one of Wall Street's most influential stocks amid a frenzy around artificial intelligence technology. While the frenzy around AI has driven some stocks to heights that critics say are overdone, Nvidia's impressive growth and prospects for further growth suggest the company may keep on growing.
Nvidia rose another 2.6% on Friday, making it the biggest driver of the S&P 500's gains.
Meanwhile, on Wall Street, Workday shares fell 15.3% despite reporting profits for its latest quarter that beat analysts' expectations. The company, which helps businesses manage their people and finances, gave a forecast for future subscription revenue that was slightly below Wall Street expectations.
Overseas stock indexes in many Asian and European countries fell, with Hong Kong down 1.4%, Seoul down 1.3% and Tokyo down 1.2%.
