Wall Street mixed but set for weekly gains

US stock indexes were mixed on Friday, but looked on track for weekly gains ahead of key inflation readings next week that could provide more clues on how soon the Federal Reserve will start cutting interest rates.

Recent data indicating a cooling US labor market and a much better-than-expected earnings season have put the benchmark S&P 500 and the tech-heavy Nasdaq Composite on track for their third consecutive week of gains.

Meanwhile, the Dow Jones Industrial Average rose for an eighth straight session, its longest daily winning run since December, and was set for a fourth week of gains.

The University of Michigan’s survey, however, took some shine off these gains as it showed US consumer sentiment sagged to a six-month low in May amid growing anxiety about inflation, unemployment and interest rates. Its reading of one-year and five-year inflation expectations rose.

Analysts noted they were focused on next week’s consumer prices data to get more clarity on the Fed’s monetary policy agenda. The consumer price index for April is seen cooling to 3.4% on a year-over-year basis, down from 3.5% in the previous month.

“This one will be very important because if we don’t see some signs of inflation decelerating, that would be worrisome for markets,” said Ronald Temple, chief market strategist at Lazard. A softer-than-expected employment report last week reignited bets that the Fed will make two 25 basis point interest rate cuts this year.

Traders are currently pricing in rate cuts of 41 basis points by the end of 2024, according to LSEG’s rate probabilities tool, with the first cut of 25 bps seen in September.

Tempering optimism about potential rate cuts, however, Dallas Fed President Lorie Logan said on Friday it’s not clear if monetary policy is tight enough to bring inflation down to the US central bank’s 2% goal, and with price pressures still too strong, it is too soon for rate cuts.

At 12:03 p.m. the Dow Jones Industrial Average rose 57.48 points, or 0.15%, to 39,445.24, the S&P 500 gained 0.36 points, or 0.01%, to 5,214.46 and the Nasdaq Composite lost 33.79 points, or 0.21%, to 16,312.48.

Most megacap stocks including Tesla, Alphabet and Apple slipped as US Treasury yields rose.

Nvidia gained 0.8% after Taiwan Semiconductor Manufacturing Co, the world’s largest chipmaker and a major supplier to Nvidia, reported a near 60% jump in April sales.

Novavax shares more than doubled in value after the vaccine maker removed doubts about its ability to remain in business and struck a licensing deal worth up to $1.2 billion with Sanofi for COVID-19 vaccines.

SoundHound AI jumped 11% after its first-quarter revenue beat market estimates.

Declining issues outnumbered advancers by a 1.39-to-1 ratio on the NYSE and by a 1.67-to-1 ratio on the Nasdaq. The S&P 500 posted 56 new 52-week highs and no new lows while the Nasdaq recorded 151 new highs and 73 new lows.

Walt Disney fell 9.7%, on track for its biggest percentage fall since November 2022, as a surprise profit in its streaming entertainment division was eclipsed by a drop in its traditional TV business and weaker box office.

Despite Disney’s drag, the three main US stock indexes were trading at a more than three week high after a weakerthan-expected labor market report last week fueled bets that the US central bank will cut rates.

The data and better-than-expected earnings reports have helped soothe investor jitters around sticky inflation and a robust economy that have kept the rates elevated.

“We’ve just come through an earning season that has improved people’s perception of the earnings outlook, we’re in this period where we don’t see a ton of upside but certainly think that the pro-risk environment we’ve seen for the past week or so continues in the coming month,” said Greg Boutle, head of US equity and derivative strategy at BNP Paribas.

He also added that the market “can’t go straight from being worried about the economy being too hot to too cold overnight.” Traders are anticipating rate cuts of 46 basis points (bps) from the Fed by the end of 2024, according to LSEG’s interest rate probabilities app, with the first pivot to rate cut seen in September and another in December.