Trader Anthony Konfusion works on the floor of the New York Stock Exchange, Thursday, May 30, 2024. Most U.S. stocks are rising after mixed earnings reports from major companies signaled the economy may be cooling. (AP Photo/Richard Drew)
NEW YORK (AP) — An already vibrant May for Wall Street ended with further gains, with stocks rising Friday on a report that inflation was at least not worsening.
The S&P 500 rose 0.8%, its sixth consecutive gain in the past seven months. A key gauge of the health of the U.S. stock market, the S&P 500 recovered all of its losses from April's slump to hit an all-time high at the end of the month.
The Dow Jones Industrial Average rose nearly 575 points, or 1.5%, but losses in some big technology stocks dragged down the Nasdaq Composite Index, which fell less than 0.1%.
Gap Inc. posted its latest quarterly profit and sales that beat analysts' expectations, growing at 28.6%, one of the market's biggest rates. The parent company of Old Navy and Banana Republic reported growth across all of its brands, reversing earlier declines for most of them. The company also raised its sales and profitability forecasts for this year, even as it noted the economic outlook remains uncertain.
Stocks broadly rose as Treasury yields fell in the bond market after the latest inflation reading was roughly in line with expectations, but questions remain about how soon Wall Street will get the low interest rates it craves.
The report said a key measure of inflation stayed at 2.7% last month, as expected. Some underlying trends also showed slightly better-than-expected improvement. That could boost the Fed's confidence that inflation is sustainably heading toward its 2% target, which the Fed says is necessary before it cuts its key interest rate.
The Federal Reserve has kept the federal funds rate at its highest level in more than two decades in an attempt to slow the economy and tame high inflation. But keeping rates high for too long could stifle economic growth, triggering a recession in which workers lose their jobs and corporate profits plummet.
“The conundrum for the Fed is whether growth will slow faster than inflation,” said Brian Jacobsen, chief economist at Annex Wealth Management. “We've gone from rapid growth to rapid slowing very quickly. The road to lower inflation has been a fun one so far, but the last mile will be much harder.”
A U.S. government report on Friday showed consumer spending growth slowed more than economists expected, and Americans' income growth also slowed last month.
Jeffrey Roach, chief economist at LPL Financial, said the numbers suggest companies “need to prepare for an environment where consumers aren't as splurge-y as they were last year.”
Following the report, the yield on the 10-year Treasury note fell to 4.50% from Thursday's close of 4.55%. Concerns about weak demand following the bond auction had pushed the yield above 4.60% earlier in the week, hurting stocks.
The yield on the two-year Treasury note, which more accurately reflects expectations of Fed action, fell to 4.87% from Thursday's close of 4.93%.
Virtually no one expects the Federal Reserve to cut interest rates when it next meets in a week and a half, but traders see a nearly 85% chance that the central bank will cut rates at least once by the end of the year, according to data from CME Group.
Shares in industries that tend to benefit most from easing interest rates led the market on Friday. Real estate stocks in the S&P 500 rose 1.9% overall, the biggest gain among the 11 sectors that make up the index. Boston Properties rose 4.3%.
Several tech stocks fell on Wall Street.
Dell fell 17.9% even though its latest quarterly profits were in line with analysts' expectations. The company's shares had already risen 122% into 2024 prior to the earnings release, meaning expectations were sky-high and analysts noted concerns about how much profit Dell was squeezing out of every dollar of revenue.
Nvidia fell for a second straight day, down 0.8%, as the company's momentum finally slowed after soaring more than 20% since reporting eye-popping earnings last week. The semiconductor company was one of the most important stocks in the S&P 500 index on Friday. But the company's soaring profits and its ability to keep Wall Street excited about the entire artificial intelligence technology industry are also a big reason the index rose 4.8% in May.
Trump Media & Technology Group Inc. fell 5.3% in its first trading day after Donald Trump was convicted of a felony on Thursday. The company, which runs the Truth social platform, had previously warned in a filing with U.S. securities regulators that a conviction for Trump could hurt the company.
MongoDB fell 23.9% despite beating earnings and revenue expectations. The developer database company gave current-quarter and full-year profit guidance that fell short of analysts' expectations.
Overall, the S&P 500 rose 42.03 points to 5,277.51, the Dow jumped 574.84 points to 38,686.32 and the Nasdaq lost 2.06 points to 16,735.02.
Overseas stock markets, Asian and European stock indexes were mixed.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
Stan Cho, The Associated Press
