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Stocks reach fresh records as yields decline

Stocks rallied this week and rates declined in response to this week's economic releases, which went the market's way in terms of implications for Fed policy. The major indices all logged fresh record highs on an intraday and on a closing basis. This price action had the Dow Jones Industrial Average trading above 40,000 for the first time. 

Specific economic reports this week included the April Consumer Price Index (CPI), showing disinflation on a year-over-year basis in total CPI (to 3.4% from 3.5%) and core CPI (to 3.6% from 3.8%). This followed three consecutive hotter-than-expected CPI readings, along with some other recent reports that indicated sticky prices, which contributed to growing worries about the Fed staying restrictive for longer than anticipated.

Before the CPI report, market participants received the April Producer Price Index (PPI). The headline inflation readings were hotter-than-expected, up 0.5% month-over-month for total PPI and core PPI versus an expected 0.3% and 0.2%, respectively, but the sizable downward revisions to last month's readings kept the market response more mixed rather than negative. 

Fed Chair Powell called the data "quite mixed" in a moderated discussion at the Foreign Bankers' Association's annual meeting.

Meme stocks exhibited a resurgence following the first X post by "Roaring Kitty" in three years. Shares of GameStop (GME) and AMC Entertainment (AMC) were beneficiaries from speculative buying interest, jumping 27.2% and 51.2%, respectively, this week. 

In other corporate news, Dow component Home Depot (HD) received a negative response to its earnings report that stemmed from disappointing sales activity at the home improvement retailer.

  • S&P 500: +1.5% for the week / +11.2% YTD

  • Nasdaq Composite: +2.1% for the week / +11.2% YTD

  • S&P Midcap 400: +0.7% for the week / +8.4% YTD

  • Dow Jones Industrial Average: +1.2% for the week / +6.1% YTD

  • Russell 2000: +1.7% for the week / +3.4% YTD

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