Stocks Ended Mostly Higher On Friday, All Major Indexes Finished Up For The Month Stocks closed mostly higher on Friday. A late day rally sent most of the indexes sharply higher. The only one in the red was the Nasdaq, but only barely, as it was off by just -0.01%. But they too rallied sharply off their lows, gaining back almost all of their -1.73% intraday loss. The big three indexes (Dow, S&P 500 and Nasdaq) were down for the week. Although, the small-cap Russell 2000 and mid-cap S&P 400 were both up for the week. But they were all up for the month. Friday's Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge, came in largely as expected. Headline inflation was up 0.3% m/m, as expected, and in line with last month's pace. On a y/y basis, it was up 2.7%, also as expected, and in line with last month's pace. The core rate (ex-food & energy) came in at 0.2%, in line with expectations, and just below last month's 0.3%. On a y/y basis, it came in at 2.8%, as expected, and in line with last month's 2.8%. The as-expected showing came as a relief. The previous CPI and PPI reports showed inflation starting to head back down, and the PCE report kind of did (or at least showed it's not heading back up). The big fear was that inflation might start climbing again. And seeing that it's not, was reassuring for the market. Of course, inflation not heading back up, doesn't give the Fed the green light just yet to cut rates. But it quiets down the chatter of possibly having to raise rates if it did. Two things will likely need to be seen before the Fed pulls the trigger. A series of inflation reports that confirms inflation is on a path to head back down to the targeted 2% level. And a noticeable easing in the labor market. We'll get a chance to check in on the jobs market on Friday, 6/7, with the always important Employment Situation report. Just the other week, Federal Reserve Governor Christopher Waller said "in the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy." In other words, they need to see inflation coming down, and the labor market easing. The sooner both of those two things happen, the sooner the Fed is likely to cut rates. Today we'll get the ISM Manufacturing report, and Construction Spending.
The week gets busier and busier with more reports on deck as the week goes on. But Friday's jobs report will be this week's main event. YTD, the Dow is up 2.64%, the S&P 500 is up 10.6%, the Nasdaq is up 11.5%, the small-cap Russell 2000 is up 2.12%, and the mid-cap S&P 400 is up 7.24%. The cyclical tendencies continue to favor the market. Namely, the 4-year Presidential cycle which shows that year 4 (that's this year) is the second-best year of all four years (second only to year 3, which was last year when the market gained 24%). Simply put, stocks typically do well in Presidential election years. Couple that with a resilient economy, a strong labor market, rising corporate earnings, household income near historic highs, and strong consumer spending, and that all bodes well for more gains to come. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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