Stock markets displayed modest weakness for much of Friday's trading session but managed to close the day almost flat. The tech-heavy Nasdaq fluctuated around the break-even mark before finally finishing at a record high.
The Nasdaq edged up 21.32 points, or 0.1%, to 17,688.88. In contrast, the S&P 500 slipped by 2.14 points, or less than 0.1%, to 5,431.60, and the Dow Jones Industrial Average fell by 57.94 points, or 0.2%, to 38,589.16.
On a weekly basis, the Nasdaq surged by 3.2%, and the S&P 500 climbed by 1.6%. However, the Dow defied this upward trend, declining by 0.5%.
Traders initially aimed to capitalize on the recent market gains, but selling pressure remained minimal due to unexpectedly mild inflation data.
Federal Reserve officials have projected only one rate cut this year following the recent monetary policy meeting. Nevertheless, traders are cautiously optimistic that these predictions may be conservative if inflation continues its downward trend in the coming months.
"A lot can change in a week. After last Friday's strong payroll report, markets were nervous. However, several favorable inflation reports this week led to a decline in yields and a rise in equities," noted Jeffrey Roach, Chief Economist for LPL Financial. "As indicated in the press conference, Chairman Powell is prepared to respond to upcoming data. Currently, some inflation pressures remain, but other indicators suggest easing, and investors can expect the Fed to begin cutting rates later this year."
The Labor Department reported unexpected declines in U.S. import and export prices for May. Import prices decreased by 0.4% following a 0.9% increase in April, contrary to economists' expectations of a 0.1% rise. Fuel import prices fell 2.0%, with non-fuel imports also dipping by 0.3%. Export prices decreased by 0.6% after an upwardly revised 0.6% increase in April. Economists had anticipated unchanged export prices compared to the initially reported 0.5% gain for the previous month.
Separately, the University of Michigan released findings showing continued deterioration in U.S. consumer sentiment for June. The consumer sentiment index dropped to 65.6 from 69.1 in May, the lowest since November 2023. Economists had expected a rise to 72.0.
Year-ahead inflation expectations remained at 3.3% in June, above the 2.3-3.0% range seen in the two years preceding the pandemic. Long-term inflation expectations inched up to 3.1% in June from 3.0% in May, the highest level since November 2023.
### Sector News
Oil service stocks experienced substantial weakness due to a modest decline in crude oil prices, with the Philadelphia Oil Service Index plunging 2.0%, hitting a four-month low. Airline stocks also showed considerable weakness, reflected by a 2.0% drop in the NYSE Arca Airline Index, reaching a six-month low. Additional notable declines were seen in steel, computer hardware, and networking stocks. Conversely, software and gold stocks moved higher.
### Other Markets
In overseas markets, trading in the Asia-Pacific region was mixed. Japan's Nikkei 225 rose by 0.2%, China's Shanghai Composite Index inched up by 0.1%, while Hong Kong's Hang Seng Index fell by 0.9%.
European markets largely moved downward. The French CAC 40 Index dropped sharply by 2.7%, the German DAX Index decreased by 1.4%, and the U.K.'s FTSE 100 Index dipped by 0.2%.
In the bond market, treasuries continued their upward trend from recent sessions. Consequently, the yield on the benchmark ten-year note dropped 2.5 basis points, closing at a two-month low of 4.213%.
### Looking Ahead
Next week's economic reports on retail sales, industrial production, housing starts, and existing home sales may draw attention. Nevertheless, trading activity could be somewhat subdued due to the Juneteenth holiday on Wednesday.
