A slew of economic data came out this week that provided some needed clarity for the market. On Tuesday, inflation data for the past month was released while Thursday saw the release of retail sale data and the Price Producers Index (PPI). Those numbers led to several ripple effects such as a rebound in stocks and a dovish fiscal policy in the second part of 2025.
The CPI report for April found that inflation rose by .2 percent for the month, which was slightly lower than an expected increase of .3 percent. Core CPI was also up .2 percent compared to a projected .3 percent increase. On an annualized basis, inflation clocked in at 2.3 percent compared to an expected 2.4 percent. This was cited as an indicator that Trump’s tariffs may not be the economic anchor that they were believed to be when first introduced.
Of course, pauses on many tariffs and other exceptions to those put in place have also buoyed hopes that a trade war will be averted. Retail sales were up .1 percent whereas they were expected to remain flat in April. Core retail sales were also up .1 percent compared to an expected increase of .3 percent. For April, the PPI came in down .5 percent despite an expected increase of .2 percent. Core PPI was down .4 percent whereas analysts expected it to increase by .3 percent.
Unemployment claims data was also released on Thursday and found that 229,000 people requested benefits in the past seven days. That was in line with what markets expected and was unchanged from the previous report issued last Thursday.
On Friday, the University of Michigan released its consumer sentiment and inflation expectations reports. Consumer sentiment dipped to 50.8 from 52.2 a month ago while respondents said that inflation would likely be at 7.3 percent a year from now.
Jerome Powell gave a speech on Thursday and addressed his vision for fiscal policy over the next several months. He said that the economy was in danger of supply shocks and that there was no rush to make any changes to the nation’s key interest rate. Prior to this week, it was expected that there would be three cuts in 2025 with the first coming in June.
Now, the market expects the first cut to come in July with a second cut in the fall and a slight possibility of a third cut in December. However, late Friday afternoon, it was announced that Moody’s has cut the US credit rating from AAA to A1, citing the impact of tariffs as a headwind to long-term growth. It’s unclear what impact this might have on future policy initiatives.
The S&P 500 finished the week up 141 points to close at 5,958, which was an increase of 2.43 percent over the past five trading days. On Monday, the index made its low of the week at 5,795 before moving higher for the remainder of the week. For the year, the index is now in positive territory after dipping below 5,000 in April.
The Dow was up 411 points this week to close at 42,654, which was an increase of .98 percent over the past five trading days. On Thursday, the market made its low of the week at 41,871 after spending the first three days losing ground. After reversing, the index trended higher and would close at its highest point of the week. For the month, the Dow is up 5 percent and is also flirting with positive territory for the year.
Finally, the Nasdaq was up 3.21 percent this week to close at 19,211, which was a gain of 597 points over the past five trading days. As with the S&P 500, the Nasdaq made its low of the week early on Monday before trending upward. In addition, this index has followed the S&P 500 and Dow Jones Industrial Average in erasing much of its losses from April. For the month of May, the market is up almost 13 percent.
The upcoming week will likely be a volatile one as the market digests the credit rating cut. Although there isn’t a lot of scheduled news coming out of the United States, a number of countries will be releasing their own inflation, retail sales and other key data points from the past month.