NEW YORK – Amid positive momentum, Wall Street wrapped up a robust week on Friday, with U.S. stocks nearing the record highs set just months ago, despite recent economic challenges. The S&P 500 advanced 0.7% marking its fifth consecutive day of gains, and it closed its third winning week in four. This impressive rebound has brought the index within 3% of its peak reached in February, recovering from a near 20% drop last month. Key to this upswing has been the growing optimism that President Donald Trump might reduce tariffs following successful trade agreements with other nations.
The Dow Jones Industrial Average gained 331 points, or 0.8%, while the Nasdaq composite rose 0.5%. The trade tensions spurred by Trump’s policies had previously shaken financial markets globally due to two significant threats: potential economic slowdown leading to recession and heightened inflation.
This week’s developments brought relief on both fronts. The U.S. and China announced a pause in many of their tit-for-tat tariffs for 90 days. Additionally, several U.S. inflation reports came in better than economic forecasts, giving the markets a boost.
Bank of America’s economic analysts, led by Claudio Irigoyen and Antonio Gabriel, deemed it “a week to remember.” Despite the positive signals, they predict ongoing volatility and maintain their broader economic forecasts. According to a report by BofA Global Research, “There is still huge uncertainty regarding the impact of tariffs on economic activity and inflation.”
This widespread uncertainty is affecting U.S. households and businesses, raising fears that they might curtail spending and halt long-term investments, which could further strain the economy. According to the University of Michigan’s latest consumer sentiment survey, confidence dipped again in May, although the decrease was not as sharp as previous months.
More concerning is the growing anticipation of inflation, with U.S. consumers expecting a 7.3% rise in the next year, up from last month’s prediction of 6.5%. High inflation expectations can potentially trigger a cycle that exacerbates inflation. It’s worth noting that the University of Michigan’s preliminary May survey results were only partially conducted after the U.S. and China declared their tariff hiatus.
On the corporate front, Charter Communications saw a 1.8% increase in its stock value following the announcement of its merger with Cox Communications. This will form a combined entity still named Cox Communications, maintaining Charter’s headquarters in Stamford, Connecticut. Elsewhere, CoreWeave’s shares surged 22.1% after Nvidia expanded its ownership in the company, which provides cloud solutions for AI workloads. Nvidia now holds 7% of CoreWeave, up from 6% prior to CoreWeave’s recent IPO.
Conversely, Novo Nordisk shares dropped 2.7% after the company announced that CEO Lars Fruergaard Jørgensen would step down amid recent market difficulties affecting the stock.
In total, the S&P 500 climbed 41.45 points to reach 5,958.38. The Dow Jones Industrial Average ascended 331.99 points to 42,654.74, while the Nasdaq rose 98.78 points to 19,211.10.
The bond market saw stable Treasury yields, with the 10-year Treasury yield slightly declining to 4.44% from 4.45% the previous day. Such decreased yields can incentivize investors to buy stocks and other assets at higher prices.
The two-year Treasury yield, often aligned with Federal Reserve policy expectations, increased to 3.99% from 3.96%, having dipped to 3.93% early in the morning before the University of Michigan survey was released.
Market participants remain hopeful that the favorable data on inflation might provide the Federal Reserve with more flexibility to consider interest rate cuts later in the year, should tariffs weigh on the U.S. economy.
Looking beyond U.S. borders, European stock indices saw modest increases, while Asian markets had mixed results. Tokyo’s Nikkei 225 slightly decreased by less than 0.1% following a government report indicating a faster than anticipated economic contraction in Japan for the first quarter this year.