Marketbites: Shoppers' Budgets Remain Under Pressure
Portfolio Manager Commentary:
Stocks jumped Friday as traders grew hopeful that lawmakers will reach a deal to raise the U.S. debt ceiling, avoiding a potentially catastrophic default. The Dow Jones Industrial Average climbed 1.0%. The S&P 500 gained 1.3%, and the Nasdaq Composite advanced 2.2%. Congressional and Biden administration negotiators were zeroing in on a deal that would increase the U.S. debt limit for two years. House Speaker Kevin McCarthy said talks Thursday night yielded progress, but added: “We’ve got to make more progress now.” Treasury Secretary Janet Yellen has warned that the U.S. could default as soon as June 1 if the debt ceiling is not raised. Economists and Wall Street leaders have also raised concern over the possibly devastating impact of a U.S. debt default.
“Once a debt deal is done, markets will have to deal with the harsh reality that the Fed is going to kill this economy,” Ed Moya, senior market analyst at Oanda, wrote on Friday. “The end of tightening might not occur until the end of summer and that means we will probably get bigger rate cuts next year.” New data out Friday morning showed inflation rose more than expected in April. The personal consumption expenditures index, the Federal Reserve’s preferred gauge of price pressures, increased 0.4% last month and 4.7% from a year earlier.
The corporate earnings season is drawing to a close, but a handful of stocks were moving in response to their reports after the bell. Retailer Gap and semiconductor stock Marvell Technology rose more than 11% and 30%, respectively, while Ulta Beauty tumbled 13%.
Chart of the Day:
Most shoppers’ budgets remain under pressure and retailers continue to adapt. Companies from Best Buy and Dick’s Sporting Goods to Kohl’s and Lowe’s flashed mixed signals on the state of the U.S. consumer this week. Inflation is weighing on Americans across income levels, and some pandemic changes in consumer behavior are expected to last. And while some companies have touted the pricing power they have on certain items, executives remain cautious about consumers’ reception to further price increases. Costco Wholesale said its average daily transaction amount fell in the most recent quarter, driven in part by weaker sales of big-ticket items such as home furnishings, electronics and jewelry.
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