The market is sensitive to economic data that challenges the ‘Goldilocks scenario,’ says Ameriprise Financial’s Anthony Saglimbene.
Major U.S. stock indexes rose Friday, with the technology-heavy Nasdaq Composite scoring a fresh record peak ahead of the three-day Memorial Day weekend.
Nvidia Corp.’s quarterly earnings were “the most important report of the week,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial. He noted, “I don’t think investors could have asked for a better report and outlook from the leader of AI,” with the results suggesting that “the AI theme has legs.”
The Nasdaq and S&P 500 each secured a fifth straight week of gains on Friday, while the Dow Jones Industrial Average snapped a five-week winning streak. Investors were buying the dip in an environment where “profits are going up” and the economy remains “strong,” according to Saglimbene.
Despite Nvidia’s surge Thursday, U.S. stocks fell that day due to concerns over economic data from S&P Global’s flash survey of U.S. services. The stronger-than-expected reading triggered some “inflation anxiety,” Saglimbene said.
Sticky inflation in the services component of the consumer-price index has worried investors, but Saglimbene believes the market overreacted, as the data likely didn’t significantly change the Federal Reserve’s policy outlook.
“It tells you how sensitive the market is to economic data that challenges this narrative that the Fed will be cutting rates this year,” Saglimbene noted, with investors seeking a “Goldilocks scenario” where economic activity declines just enough to keep rate cuts on the table.
U.S. stocks finished higher Friday, with the Dow Jones Industrial Average rising less than 0.1%, the S&P 500 gaining 0.7%, and the Nasdaq Composite climbing 1.1%.
The Nasdaq closed at a record 16,920.79, while the S&P 500 ended at 5,304.72, just 0.3% below its record close.
Traders are assessing whether the S&P 500’s current level around 5,300 is a ceiling or a support level for further gains, Saglimbene said. He believes the S&P 500 can “gravitate” higher due to the “positive” earnings outlook for U.S. companies.
The key economic report next week will be the U.S. inflation reading for April from the personal-consumption expenditures price index, due May 31.
The U.S. stock market will be closed Monday, May 27, for Memorial Day.
