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James Hyerczyk
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U.S. Stock Market

The major U.S. stock indexes settled higher on Friday, bringing some calm to markets that experienced wicked bouts of buying and selling throughout the week as investors betting on a rebounding economy battled with those reacting to inflation jitters.

Those big swings were stoked by economic data, which fanned concerns that near-term price spikes could translate into long-term inflation, despite assurances to the contrary from the U.S. Federal Reserve.

In the cash market, the benchmark S&P 500 Index settled at 4173.85, up 61.35 or +1.47%. The blue chip Dow Jones Industrial Average finished at 34382.13, up 360.68, up 1.05% and the tech-driven NASDAQ Composite closed at 13429.98, up 304.99 or +2.27%.

Economic News

U.S. equity markets advanced on Friday even after data showed consumer purchases slowed down last month. Economic data showed retail sales growth stalling and consumer sentiment dipping as prices remain on an upward trajectory, suggesting that while the demand boom might be taking a breather, inflation has not.

The unchanged reading in retail sales last month followed a 10.7% surge in March, the second-largest increase on record and an upward revision from the previously reported 9.7% increase. Economists polled by Reuters had forecast retail sales would rise 1.0%. Retail sales surged 51.2% on a year-on-year basis.

The boost from stimulus checks faded, but an acceleration is likely in the coming months amid record savings and a reopening economy. Consumer spending may be on a higher growth path heading into the second quarter based on signs that Americans were starting to shift their spending from goods to services like restaurants and bars, with more than a third of the population vaccinated against COVID-19.

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Revised Guidance from the CDC

Prices may have been underpinned by revised guidance from the U.S. Centers for Disease Control and Prevention (CDC), which strongly suggested that economic activity could return to normal.

The CDC on Thursday advised that fully vaccinated people do not need to wear masks outdoors and can avoid wearing them indoors in most places, updated guidance the agency said will allow life to begin to return to normal.

Not everyone embraced the news with the Retail Industry Leaders Association saying the announcement creates ambiguity because it fails to fully align with state and local orders. Meanwhile, supermarket chain Kroger Co said it would keep its mask requirements in place “at this time.” Target Corp said it will continue requiring coronavirus safety measures in all stores, including masks and social distancing, while it reviews the guidance.

However, stocks most exposed to the on-going recovery jumped. United Airlines and American Airlines both climbed more than 5%. Carnival and Norwegian Cruise Line shares both popped more than 8%, while Royal Caribbean advanced more than 7%.

For a look at all of today’s economic events, check out our economic calendar.
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