Stocks rose on Friday, logging a second straight day of increases but still posting weekly declines after steep drops earlier this week.
The Dow gained more than 350 points, or 1%, after the index posted its best single-session gain since March on Thursday. The Nasdaq outperformed with a rally of more than 2%, led by a rebound in technology stocks. The S&P 500 gained 1.5%.
Shares of Disney (DIS) slid after the company posted quarterly revenue that missed estimates, with subscribers to Disney+ falling short of Wall Street's expectations and the firm's theme parks division losing money for a fourth straight quarter. Coinbase (COIN) shares declined even after the crypto exchange boosted its full-year outlook, and as cryptocurrencies including Bitcoin and Ethereum recovered losses from earlier this week. Home rental company Airbnb (ABNB) topped first-quarter sales estimates but posted a wider-than-expected quarterly loss, though shares ended the session higher.
Investors this week have been nervously eyeing signs of inflation in the economic recovery coming out of the pandemic. Both consumer and producer prices surged in April over last year, reflecting both an inevitable bounce off last year's virus-depressed levels as well as upward price pressures as demand across supply chains outstripped supply. Consumer prices surged by a faster than expected 4.2% year-over-year last month, government data showed earlier this week. And producer prices also came in higher than expected, with core producer prices rising 4.1% last month versus the 3.8% increase expected.
However, signs that fewer workers were leaving the job market at least temporarily helped assuage market participants' fears over labor supply shortages on Thursday. New weekly jobless claims fell to a pandemic-era low last week, dipping below 500,000 for the first time since March 2020.
A new print on retail sales from the Commerce Department on Friday gave the latest update on consumer demand. Retail sales were flat month-on-month in April, down from the revised 10.7% increase reported during the prior month, with some pay-back occurring after stimulus checks boosted March's spending.
Altogether, investors are weighing whether the strength of the post-COVID economic recovery will in fact spur an overheating of the economy – and if that becomes the case, when the Federal Reserve will ultimately choose to step in.
"I think the big problem for investors right now is the Fed isn't going to change its course any time soon. But a lot of people who do have inflation fears longer-term are going to look for a shift in monetary policy that won't take place," George Ball, Sanders Morris Harris CEO, told Yahoo Finance on Thursday. "And so while people wait and wait and wait, those fears will become greater. And I think ultimately they tug prices down, although not yet. We of the investing class like to see prices going higher, and there is momentum still in the market that is still on the bull side, at least temporarily, than on the downside."
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4:00 p.m. ET: Stocks post back-to-back sessions of gains
Here's where markets ended the day on Friday:
S&P 500 (^GSPC): +61.24 points (+1.49%) to 4,173.74
Nasdaq (^IXIC): +304.99 points (+2.32%) to 13,429.98
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1:47 p.m. ET: The greatest number of S&P 500 companies are citing 'inflation' on earnings calls since 2010
Executives at S&P 500 companies are addressing inflation concerns at the highest rate in over a decade, according to FactSet data, as both consumer and producer prices climb from last year's pandemic-weakened levels.
Based on FactSet's report, 175 companies have cited the term "inflation" during their earnings calls for the first quarter, for the largest total going back to at least 2010. To come up with this figure, the firm searched for the term "inflation" in conference call transcripts of all S&P 500 companies conducting earnings conference calls between March 15 and May 14.
"At the sector level, the Industrials sector has the highest number of companies citing 'inflation' on earnings calls for Q1 2021 at 46, followed by the Consumer Discretionary (25), Financials (22), Consumer staples (21) and Materials (21) sectors," FactSet's John Butters wrote. "However, the Consumer Staples (84%) and Materials (75%) sectors have the highest percentages of companies that have cited 'inflation' on their Q1 earnings calls from March 15 through May 14."
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10:45 a.m. ET: Consumer sentiment unexpectedly dropped in May: U. Michigan
The headline index of consumer sentiment fell to 82.8 in the preliminary May report, down from the 88.3 reported in April. Consensus economists were looking for a rise to 90.0, based on assumptions that vaccinations, business reopenings and firming labor market conditions would stoke optimism.
"Consumer confidence in early May tumbled due to higher inflation—the highest expected year-ahead inflation rate as well as the highest long term inflation rate in the past decade," Richard Curtin, chief economist for the university's Surveys of Consumers, said in a statement. "Rising inflation also meant that real income expectations were the weakest in five years. The average of net price mentions for buying conditions for homes, vehicles, and household durables were more negative than any time since the end of the last inflationary era in 1980."
"Importantly, consumer spending will still advance despite higher prices due to pent-up demand and record saving balances," he added. "This combination of persistent demand in the face of rising prices creates the potential for an inflationary psychology, fostering buy-in-advance rationales and cost-of-living increases in wages."
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9:50 a.m. ET: The disappointing April retail sales report 'is slightly stronger than it looks': Economist
April's retail sales report surprised economists looking for another monthly increase, with the print instead showing consumer spending was flat on the month. While the moderation was a disappointment, the slowdown was inevitable given the strength of spending seen in March after the distribution of stimulus checks, many economists said.
Here's what Andrew Hunter, senior U.S. economist for Capital Economics, had to say about the April retail sales report:
"The unchanged reading for retail sales in April is slightly stronger than it looks given that it follows an upwardly-revised 10.7% m/m surge in March, and it suggests that the boost from the $1,400 stimulus checks has only partly faded. Nevertheless, as goods spending inevitably drops back over the coming months we were hoping for an offsetting rebound in services. But food services sales only increased by 3.0% m/m last month, a marked slowdown on the March gain, which is a hint that labor shortages and the resulting surge in wages and prices may be acting as a constraint on the recovery in real activity. "
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9:40 a.m. ET: 'A little sideways consolidation will be perfectly normal' in stocks this summer: Strategist
Over the past several months, many strategists had been predicting a pullback in markets following last year's record-setting rally off the March 2020 pandemic low. While the sharp drop in stocks earlier this week appeared to be the start of such a pullback, some strategists said a larger one is yet to come this year.
"We're thinking a bigger pause to come," Ryan Detrick, chief market strategist at LPL Financial, told Yahoo Finance on Friday. "The market looks good, value's probably going to outperform growth, those are still the themes we have. It's just we've been pretty spoiled, so maybe a little sideways consolidation will be perfectly normal these troublesome summer months."
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9:30 a.m. ET: Stocks open higher, heading toward back-to-back days of gains
Here were the main moves in markets as of 9:30 a.m. ET:
S&P 500 (^GSPC): +32.85 points (+0.8%) to 4,145.35
Import prices increased 0.7% in April over March, the Commerce Department said Friday. This was slightly above the 0.6% rise expected. March's imports price increase was also upwardly revised to 1.4%, from the 1.2% previously reported.
While much of the rise came from an extended advance in energy prices, other categories also contributed to the increase. Excluding petroleum prices, import prices still rose 0.7% over last month, or faster than the 0.5% rise expected. Imported food costs increased 2.0%.
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8:31 a.m. ET: Retail sales unexpectedly come in flat month-on-month, slowing after March's stimulus-boosted surge
The Commerce Department said retail sales registered no change month-on-month in April, disappointing economists looking for a 1.0% rise, according to Bloomberg consensus data. However, the prior month's jump was upwardly revised to 10.7%, from the 9.8% previously reported. That marked the biggest gain since May 2020.
Excluding autos and gas sales, retail sales in fact fell 0.8% in April over March, versus the 0.3% rise expected. The prior month's retail sales excluding autos and gas rose 8.9%, or faster than the 8.2% previously reported.
Some of the categories that saw the biggest gains in March reversed course in April. Clothing and clothing accessories stores saw sales drop by 5.1%, and general merchandise store sales were down 4.9%. However, food service and drinking places logged more gains, with sales at these venues rising 3.0% to bring this category's year-on-year rise to 116.8%.
As a whole, retail sales were 51.2% higher last month than in the same month in 2020, at the height of stay-in-place orders in the U.S.
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7:18 a.m. ET Friday: Stock futures jump, Dow futures gain 150+ points while Nasdaq futures add 1%
Here were the main moves in markets ahead of the opening bell:
S&P 500 futures (ES=F): 4,133.25, up 26.25 points or 0.64%
Dow futures (YM=F): 34,092.00, up 154 points or 0.45%
Nasdaq futures (NQ=F): 13,240.00, up 140.5 points or 1.07%
