FX.co ★ Wall Street and rising stocks: what are experts saying ahead of inflation data?

At the end of the working week, the U.S. stock market showed a slight increase. All three major indices - S&P 500, Dow and Nasdaq - ended the week with positive dynamics. The largest growth among them was demonstrated by Dow Jones, which showed the best results since mid-December.

The growth of shares took place against the background of analyzing by investors the statements of representatives of the Federal Reserve System (FRS) of the USA. They are expecting new inflation data to be released next week.

Comments from a number of Fed members clarified investors' expectations ahead of the publication of important economic indicators. Chuck Carlson, head of Horizon Investment Services, emphasized that many prefer not to make significant decisions before the release of inflation data.

The President of the Federal Reserve Bank of Atlanta, Raphael Bostic, noted the slowdown in economic growth, but the timing of a possible reduction in Fed rates remains uncertain. At the same time, the President of FRB Dallas Laurie Logan expressed doubts about the adequacy of the current monetary policy to reduce inflation to the target level of 2%.

Next week, the U.S. Department of Labor is expected to publish consumer and manufacturing price indexes, which will provide additional data on inflation.

Experts suggest that the upcoming CPI report will reveal core inflation at 3.6% annualized, which would be the highest rate in three years.

Paul Nolty, senior wealth advisor and market strategist at Murphy & Sylvest in Elmhurst, Illinois, expressed the view that the Federal Reserve is looking to lower interest rates rather than raise them.

He emphasized that the strategy of keeping rates high for the long term would prove to be highly disadvantageous unless economic conditions deteriorate significantly.

In addition, the University of Michigan's preliminary analysis of consumer sentiment in May showed a significant drop in optimism among U.S. consumers since August 2021, with both short- and long-term inflation expectations strengthening.

The Dow Jones Industrial Average index rose 125.08 points or 0.32% to 39,512.84. The S&P 500 Index increased 8.6 points or 0.16% to 5,222.68, while the Nasdaq Composite Index declined 5.40 points or 0.03% to 16,340.87.

Among the 11 key sectors of the S&P 500, consumer staples companies posted the biggest gains, while stocks from the consumer discretionary sector performed the worst.

The quarterly reporting season is nearing completion. According to LSEG, of the 459 companies in the S&P 500 Index that have already reported, 77% of them beat analysts' expectations.

Nvidia shares rose 1.3% after news that Taiwan Semiconductor Manufacturing Co, the world's top chip maker and a key supplier to Nvidia, reported a nearly 60% increase in April sales.

Novavax shares jumped 98.7% following the announcement of a license agreement worth up to $1.2 billion with Sanofi.

SoundHound AI shares rose 7.2% after the company reported revenue that exceeded estimates for the first quarter.

A rally in global stock markets lifted share prices in Europe to record highs on Friday, thanks to strong corporate reports and expectations that central banks will soon cut interest rates. At the same time, the dollar strengthened despite signs of slowing economic growth in the US.

European markets posted their biggest weekly gains since late January. The cross-regional STOXX 600 index rose for the sixth consecutive session and the FTSE 100 index in London reached a new record high.

Outstanding financial results in both Europe and North America, as well as equity gains in Tokyo and other Asian regions, helped the MSCI Global Index come close to setting a new record closing high, remaining just 0.2% below that mark.

U.S. equity markets stabilized thanks to a successful reporting season in which corporate results generally beat expectations, according to Deke Mullarkey, managing director of investment strategy and asset allocation at SLC Management in Boston.

"It definitely added to confidence that economic growth is being sustained, with companies successfully maintaining their profitability," said Mullarkey.

In Europe, the prospect of lower interest rates continues to drive equity markets across the eurozone, making them attractive to global asset allocators, he added.

Europe's STOXX 600 index ended the trading day up 0.77%, Britain's FTSE was up 0.63% and the MSCI global equity index was up 0.31%, just 0.2% below a new closing high.

The U.S. dollar recovered from its initial decline and posted modest gains as investors analyzed U.S. consumer sentiment data and reacted to extensive comments from Federal Reserve officials.

The dollar index, which reflects the currency's value against a basket of six major currencies, rose 0.07% to 105.29. The euro weakened 0.1% to $1.077 and the Japanese yen lost 0.17% to settle at 155.74 per dollar.

The British pound posted moderate declines on a weekly basis after the Bank of England outlined the prospects for an interest rate cut next month and it was announced that the UK economy came out of recession in the first quarter.

Exceeding inflation forecasts last month defeated expectations of an imminent rate cut in the US, but markets are now forecasting a possible rate cut in November, reducing estimates of the likelihood of a rate change in September.

At the same time, the likelihood of the Bank of England cutting rates in June is estimated as 50/50, and almost certainly in August. Markets are also pricing in an 88% chance that the European Central Bank will ease policy as soon as June.

Bank of England Governor Andrew Bailey said the upcoming interest rate cut could be larger than market participants expect, highlighting the widening difference in rate expectations between Europe and the US.

U.S. Treasury yields rose as traders await key April inflation data due next week that will influence the Federal Reserve's future monetary policy outlook.

The 10-year Treasury yield jumped 5.1 basis points to 4.5%, while the two-year yield, closely tied to interest rate expectations, rose 6.3 basis points to 4.8698%.

Oil prices fell about $1 a barrel as Federal Reserve officials hinted at the possibility of higher interest rates for an extended period. This could limit oil demand from the world's largest consumers.

US light crude futures fell $1 to $78.26 a barrel, while Brent crude fell $1.09 to $82.79 a barrel.

Gold prices rose, heading for their best week in five years. The rise in non-yielding bullion was supported by weak US employment data this week, fueling expectations that the Federal Reserve will cut interest rates throughout the year.

Gold futures for June delivery rose 1.5% to $2,375 an ounce.

At the same time, the price of Bitcoin decreased by 3.19%, settling at $60,613.00.