Market Perspective for May 11, 2024

Although there wasn’t a lot of news released this week, what did come out provided some key insight into what consumers are thinking about the economy.

Perhaps the biggest news announcement in the United States came on Friday with the release of the University of Michigan’s Consumer Sentiment and Inflation Expectations reports. Consumer sentiment fell to 67.4 compared to 77.2 a month ago, and the May figure represents the most pessimistic that respondents have been since November 2023. Prior to the release, it was expected that consumer sentiment would be 76.2.

In addition, inflation expectations increased from 3.2% to 3.5%. Essentially, respondents believe that the inflation rate will be 3.5% at this point in 2025. It’s important to note that this was the preliminary figure for May, which means that consumer sentiment or inflation expectations may be higher or lower than indicated right now.

On Thursday, unemployment claims data was released and revealed that 231,000 people requested benefits over the past seven days. This compares to an expected 212,000 claims and 209,000 claims recorded last week. When combined with last week’s softer than expected jobs report, it could be another sign that the economy is starting to slow in a meaningful way.

The S&P 500 was up 1.24% this week to close at 5,222. It would start the week at 5,157 before steadily climbing to 5,235 on Friday morning. The market would make most of its gains after testing the weekly low on Wednesday morning, and it is currently about 25 points off the yearly high that was set back in March.

The Dow would finish the week up 1.75% to close at 39,512. Like the S&P, the Dow would make a weekly low of 38,704 on Monday before spending the rest of the week gaining ground. The high of the week was established on Friday morning when the index hit 39,534. As with the S&P 500, the Dow is also within striking distance of the yearly high of 39,807 set during the final days of March.

Finally, the Nasdaq would finish the week higher closing at 16,340, which was an increase of 0.55% over the past five trading days. The market would make a low of 16,229 on Wednesday before reversing and making a high of 16,443 on Friday morning. Unlike the other markets, the Nasdaq would spend almost the entire week in a trading range as opposed to trending in one direction or the other.

Important events did take place internationally. In Australia, it was announced that the country’s main interest rate would remain at 4.35%, and in a statement, it was revealed that interest rates could remain elevated for the rest of 2024 and beyond.

This contrasts with the European Central Bank (ECB) that is expected to cut rates at least once this summer and could cut rates aggressively as the year continues. The Bank of England (BOE) on Thursday kept the nation’s interest rate at 5.25% and also mentioned that rate cuts could be forthcoming in the near future.

Finally, on Friday morning, it was revealed that Canada’s interest rate remained steady at 6.1%. Furthermore, it was revealed that the country had a net gain of 90,000 jobs over the past month.

The upcoming week should be a more interesting one for traders as inflation data is set to be released on Wednesday. Retail sales data is also set for release on Wednesday while the Producer Price Index (PPI) is also set to be made public on Tuesday. It’s expected that monthly inflation will remain at .4% while yearly inflation will tick down to 3.4%. Federal Reserve Chairman Jerome Powell is also scheduled to talk on Tuesday, which could add some volatility to the markets.

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