May 31 2024: U.S. stocks climbed on Friday, reversing earlier losses, as indications of stable inflation fueled optimism about potential interest rate cuts by the Federal Reserve.
As of 09:35 ET (13:35 GMT), the Dow Jones Industrial Average increased by 75 points, or 0.2%, the S&P 500 added 7 points, or 0.1%, and the NASDAQ Composite rose by 10 points, or 0.1%.
Positive Sentiment from Stable PCE Data
Investor sentiment improved following the release of the personal consumption expenditures (PCE) price index, the Fed’s favored inflation measure, which remained at 2.7% in April, the same as in March, indicating stable inflation.
Excluding volatile items like food and fuel, the year-on-year “core” PCE also matched the previous month’s figure of 2.8%, as anticipated.
The month-on-month figures showed slight variations from expectations. The headline PCE came in at 0.3%, consistent with March, while the “core” monthly figure rose by 0.2%, slightly below the expected 0.3%.
Recent doubts about potential interest rate cuts by the Federal Reserve have impacted market sentiment, especially as policymakers cautioned that persistent inflation might prevent the central bank from easing policy soon.
Dallas Fed President Lorie Logan expressed concern on Thursday about potential inflation risks and emphasized the need for the central bank to remain “flexible” and consider “all options” as it evaluates economic data.
Despite these concerns, all major benchmarks are poised to record a sixth positive month in seven. The DJIA has risen 0.8% this month, the S&P 500 has increased by 4%, and the tech-heavy NASDAQ Composite has surged about 7%, heading for its best month since November 2023.
Dell Shares Fall on Weak Earnings; Zscaler Rises
In the corporate sector, the end of the first quarter earnings season has brought about significant volatility.
Dell Technologies (NYSE
) dropped 15% after the company provided a lower-than-expected earnings outlook for the current quarter and indicated that increased spending on server infrastructure for artificial intelligence workloads would impact full-year margins.
Apparel retailer Nordstrom (NYSE
) declined 3% due to disappointing quarterly profits, while developer data platform MongoDB (NASDAQ
) fell 23%.
Conversely, Gap (NYSE
) jumped 20% after the retailer raised its annual sales forecast and reported better-than-expected first-quarter results. Cloud security firm Zscaler (NASDAQ
) rose 15% following strong quarterly earnings and an upward revision of its guidance.
Crude Oil Prices Edge Higher but Face Monthly Losses
Crude oil prices inched higher on Friday, supported by U.S. inflation data, but remain on track for monthly losses due to concerns about weaker demand this year.
By 09:35 ET, U.S. crude futures (WTI) were up 0.3% at $78.16 per barrel, while Brent crude increased 0.5% to $82.27 per barrel. Both benchmarks are expected to decline between 1% and 2% in May.
U.S. oil inventories saw a larger-than-expected decrease last week, according to data released on Thursday, but gasoline inventories grew by 2 million barrels, more than anticipated. This raised concerns about sluggish demand in the world’s largest fuel consumer as the summer travel season approaches.
Additionally, weak Chinese manufacturing activity data suggested slowing growth in the world’s largest crude importer.
