U.S. stocks finished Friday’s trading higher, extending their run of weekly gains even as a University of Michigan survey found consumers feeling worse about the economy. The divergence widened as investors weighed steady corporate earnings momentum against mounting concerns about inflation, driven in part by expensive oil associated with the war with Iran.
The market’s steady climb left the S&P 500 up 0.4% and near its all-time high set earlier in the week, while the Dow rose 294 points, or 0.6%, and the Nasdaq rose 0.2%. The S&P 500 closed at 7,473.47; the Dow finished at 50,579.70; and the Nasdaq composite ended at 26,343.97.
Corporate results helped power the gains. Ross Stores jumped 8.1% after the off-price retailer reported profit and revenue for its latest quarter that easily cleared analysts’ expectations. CEO Jim Conroy said the company saw strong customer traffic through the three months and that its results could have benefited from households spending their tax refunds.
Other companies also posted results that beat expectations. Estee Lauder surged 11.9% after saying it was no longer considering a possible merger with Puig, the Spanish fragrance and beauty products company. Workday rose 5.2%, and Zoom Communications jumped 9.2% after both delivered better profit reports for the latest quarter than analysts expected.
The stock rally has coincided with a marked deterioration in how households view the economy. The University of Michigan survey showed consumer sentiment fell to a record low, dipping below a low point reached in 2022 when inflation peaked above 9%. It also showed households forecast inflation would worsen to 4.8% in the coming 12 months, up from 4.7% the prior month, while their longer-run inflation forecasts rose to 3.9% from 3.5%.
Energy price uncertainty remained a key thread in the economic backdrop. The price for a barrel of Brent crude oil for August delivery added 0.7% to settle at $100.21 after earlier losses, as traders tracked uncertainty around when the United States and Iran might reach a deal to reopen the Strait of Hormuz. With the closure preventing oil tankers from exiting the Persian Gulf, crude delivery routes have remained constrained.
Rising inflation worries also pushed bond yields higher worldwide, complicating expectations for interest-rate cuts. The 10-year Treasury yield edged down to 4.56% from 4.57% late Thursday, but remained above a pre-war reference level of 3.97%. The pressure on yields has left expectations for rate cuts later in the year largely pared back on Wall Street, and higher borrowing costs have also contributed to an elevated long-term U.S. mortgage rate.
In remarks Friday, Federal Reserve Gov. Christopher Waller said that if he believed inflation expectations were becoming “unanchored,” he would not hesitate to support an increase in the target range for the federal funds rate. But he also said it was “time to simply sit and watch how the conflict and the data evolve,” adding that he did not believe expectations were currently unanchored.
Stock markets abroad rose as well, with Japan’s Nikkei 225 climbing 2.7% to another record after a report showed inflation hitting a four-year low in April at 1.4%. Indexes in Europe and Asia also advanced as trading followed the same mix of earnings strength and rate and oil-market jitters.