On Friday, the Dow 30 index is set for gains, S&P 500 poised for fifth-straight win as Nasdaq Composite is also set to rise, with options expirations in focus.
The US stocks are rallying as optimism over the US-China trade deal and easing inflation pressures continues to support market sentiments.
For the US markets, it has been a comparatively positive week. Week to date, the S&P 500 is up 4.5%, and the Dow has gained 2.6%. The Nasdaq Composite has jumped more than 6% this week. Both the S&P 500 and Dow closed higher on Thursday, while the Nasdaq fell slightly.
Stocks have recently risen as global trade tensions have eased and data on the US economy has remained positive, despite ongoing concerns about the possible impact of tariffs on inflation, economic growth, and corporate earnings.
Latest reports on April retail sales and weekly unemployment claims met economists’ forecasts, while a closely watched indicator of wholesale level inflation indicated an unexpected dip in prices last month.
Are tariffs impacting consumer sentiments? Not really. A key indicator of the impact of tariffs on the economy isn’t flashing warning signs yet, as retail sales growth continued in April. Economists are watching retail sales as an important signal on whether consumer fears about President Donald Trump’s tariffs are making them hesitant to spend money.
So far, poor consumer sentiment surveys haven’t resulted in a meaningful decline in spending, mainly as people rush to buy items before tariffs raise prices. However, economists still expect a slowdown as tariffs work through the economy.
Even as the temporary agreement between the United States and China has buoyed spirits this week, some large American corporations are expressing concerns about rising prices and a bleak macroeconomic forecast. Walmart announced on Thursday that it will most likely have to hike prices on some items in late May owing to tariffs.
The pause in the U.S.-China trade war has many investors doubting that the Federal Reserve will cut interest rates soon, since fears of an impending recession are easing.
Bond markets are still eyeing at least one Fed cut this year, even as they start pricing in chances of a longer Fed delay.
The next Federal Open Market Committee (FOMC) meeting is on June 17-18, when the summary of economic projections will also be released by the Committee. The projections will give cues to the markets as to how many rate cuts are expected by the Fed in 2025.
But, before Powell and his team sit to decide on the rates, the inflation numbers for May would have been out. May 2025 CPI data are scheduled to be released on June 11.