NASDAQ 100, Dow Jones, S&P 500: Stocks Surge on Positive Inflation Data, Consumer Confidence Boost

Highlights

• Stocks climb on positive inflation data and boosted consumer confidence.
• May core PCE index rises less than expected, supporting disinflation argument.
• Strong performance in June and first half sets optimistic tone.

Stocks Surge on Positive Data

Stocks climbed on Friday, marking a strong finish to the first half of 2023, buoyed by encouraging inflation data and a boost in consumer confidence.

Inflation Data Supports Disinflation Outlook

The May core personal consumption expenditures (PCE) price index, a key indicator for the Federal Reserve, rose less than anticipated, increasing 4.6% from a year ago, below economists’ expectations of 4.7%. Inflation, including food and energy components, showed a softer increase of just 0.1% month-on-month and 3.8% year-on-year, down from April’s reported increases of 0.4% and 4.3% respectively.

These positive inflation figures reinforce the argument for disinflation, indicating that the Federal Reserve’s decision to pause is justified. Maintaining stability at these levels is crucial to prevent overcorrection and unnecessary recession while effectively managing a now-controlled economic threat.

Consumer Confidence Soars

Adding to the optimistic sentiment, consumer confidence surged in June, as revealed by the closely watched University of Michigan sentiment survey. The headline index rose to 64.4, surpassing May’s 59.2 and exceeding the Dow Jones estimate of 63.9. In a further positive development, inflation expectations for the coming year plummeted to 3.3%, a significant drop from 4.2%, marking the lowest reading since March 2021.

Upbeat End to Second Quarter

As Friday also marks the conclusion of the second quarter and the first half of the year, investors closely monitored the performance of key indexes. In June, the S&P 500 gained 6%, positioning it for its strongest monthly performance since January. The Nasdaq advanced 6.1%, and both indices are set to secure a fourth consecutive positive month. The Dow climbed 4.3% and is on track for its best month since November.

Markets Posts Impressive Monthly, Quarterly, Annual Gains

Looking at the second quarter, the S&P 500 registered a 7.9% increase, heading for a third consecutive quarter of gains. The Nasdaq boasted a gain of 12% for back-to-back positive quarters, while the Dow recorded a 3.3% jump, also on pace for a third winning quarter.

In terms of year-to-date performance, the S&P 500 rose 15.5%, marking its best first half since 2019. The Nasdaq surged 31%, on track for its strongest first half since 1983. The Dow achieved a more modest gain of 3.6%.

Apple Shares Hit $3 Trillion Market Cap

For the week, all three major averages were poised for a positive finish, each posting gains of over 1%. Notably, Apple’s shares soared more than 1%, propelling the company’s market cap above $3 trillion. Apple has been a standout performer this year, with a remarkable rally of over 48%. Additionally, Nike shares experienced a slight setback, falling approximately 2% following a weaker-than-expected quarterly profit report.

Easing Inflation Reason for Optimism

Overall, the stock market’s upward trajectory, supported by easing inflation and rising consumer confidence, has set an optimistic tone for investors as they enter the second half of the year.