The market is highly responsive to economic data that disrupts the ‘Goldilocks scenario,’ says Anthony Saglimbene of Ameriprise Financial.
On Friday, major U.S. stock indexes rose, with the tech-heavy Nasdaq Composite hitting a fresh record peak ahead of the Memorial Day weekend.
Nvidia Corp.’s quarterly earnings were “the most important report of the week,” according to Saglimbene, chief market strategist at Ameriprise Financial. He stated, “I don’t think investors could have asked for a better report and outlook from the leader of AI,” suggesting that “the AI theme has legs.”
Both the Nasdaq and the S&P 500 secured their fifth consecutive week of gains on Friday, while the Dow Jones Industrial Average ended its five-week winning streak. Investors were buying the dip amid rising profits and a strong economy, said Saglimbene.
Although Nvidia surged Thursday following its robust earnings, U.S. stocks dropped that day due to concerns over economic data from S&P Global’s flash survey of U.S. services. The stronger-than-expected reading sparked “inflation anxiety,” Saglimbene explained.
Sticky inflation in the services component of the consumer-price index has been a concern, but Saglimbene believes investors overreacted, as the data likely didn’t significantly alter the Federal Reserve’s policy outlook.
“It shows how sensitive the market is to economic data that challenges the narrative of Fed rate cuts this year,” Saglimbene noted, with investors hoping for a “Goldilocks scenario” where economic activity declines just enough to justify rate cuts.
On Friday, U.S. stocks finished higher, 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 debating whether the S&P 500’s current level around 5,300 is a ceiling or a support level for further gains. Saglimbene believes the S&P 500 can “gravitate” higher due to the positive earnings outlook for U.S. companies.
Next week’s key economic report 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.
John Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis.
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