Nasdaq turns higher as S&P 500 pushes into record territory

What’s driving the market?

With investors looking ahead to next week’s meeting of Federal Reserve policy makers, there were few clear catalysts for Friday’s trading, analysts said.

“There’s probably some chance, with the Fed meeting next week, of a bit more of a ‘let’s-see-what-they-have-to-say type of approach,” said Jim Baird, chief investment officer of Plante Moran Financial Advisors, in a phone interview.

The big question is whether policy makers will come forward with details about their thinking around an eventual tapering of the Fed’s bond-buying program, offering investors “more of a peek behind the curtain,” he said.

Several Fed officials have said the Fed should begin contemplating when it would be appropriate to discuss easing up on purchases. Investors meanwhile have been parsing details surrounding inflation.

“The question now is, is this the beginning of a 1970s-style spiraling of prices, in which case that would be very bad for the markets,” Eric Diton, president The Wealth Alliance, which oversees more than $1.2 billion of assets, said in a phone interview. The market appears to believe inflation spikes will be transient as the shortages of goods in the pandemic will prove temporary, according to Diton.

“We believe we are in the early stages of this global economic recovery,” he said. “There is a lot more demand coming while you have an accommodative Federal Reserve.”

Traders have been attempting to make sense of a Thursday rally in Treasurys that dragged down yields despite data showing the rate of U.S. consumer inflation over the past year escalated to a 13-year high of 5% from 4.2% in the prior month. That put it at the highest level since 2008, when the cost of oil hit a record $150 a barrel. Before that, the last time inflation was as high was in 1991.

The fall in Treasury yields provided a lift for equities, particularly shares of tech-related companies and others sensitive to interest rates.

Read: U.S. Treasury yields fall despite higher inflation: Here are some reasons why

Meanwhile, a bipartisan group of senators — five Democrats and five Republicans — are pushing an infrastructure plan with $579 billion in new spending as negotiators try to strike a nearly $1 trillion deal on President Joe Biden’s top priority, according to those briefed on the plan. Talks between Biden and Senate Republicans broke down earlier this week.

In U.S. economic data on Friday, the preliminary estimate of the index of consumer sentiment released Friday by the University of Michigan rose to 86.4 in June versus 82.9 in May. The figure came in above expectations from economists polled by The Wall Street Journal, who forecast the indicator to increase to 84.4.

The survey found inflation remained a top worry for consumers, though expectations for the U.S. inflation rate eased somewhat. In the next year, consumers expect prices to increase 4% compared with a 4.6% in May. For the next five years, inflation is expected to rise by 2.8%, down from 3% the prior month.

The small rise in the consumer-confidence index coupled with the slight drop in expected inflation suggests households might not be as overly worried about surging inflation, said Michael Pearce, senior U.S. economist at Capital Economics, in a note.

“But the details of the survey reveal widespread concern about surging home and auto prices, which could act as a brake on real consumption growth in the months ahead,” he wrote.

Which companies are in focus?

• Shares of Chewy Inc.
  CHWY,
  -5.81%
  fell more than 5% after the pet-products retailer surprised Wall Street late Thursday with a quarterly profit, but said it was facing labor shortages and supply problems that had led it to run out of some items.
• McDonald’s Corp.
  MCD,
  +1.00%
  said hackers stole some data from its systems in markets including the U.S., South Korea and Taiwan, the latest case of cybercriminals attacking a high-profile global company. Shares were up 0.7%.
• Meme stocks remained in focus, with shares of AMC Entertainment Holdings Inc.
  AMC,
  +15.39%
  up 4.8%, after falling 22.2% over the past two sessions. The stock and other meme stocks, took a hit Thursday after GameStop Corp. 
  GME,
  +5.88%
  disclosed that the Securities and Exchange Commission was looking into the “trading activity” around its stock and those of other companies. GameStop’s stock fell more than 2% after tumbling 27.2% on Thursday. 

What are other markets doing?

• The yield on the 10-year Treasury note slipped to 1.466%. Yields and bond prices move in opposite directions.
• The ICE U.S. Dollar Index
  DXY,
  +0.48%,
  a measure of the currency against a basket of six major rivals, rose 0.6%.
• Oil futures ended higher, with the U.S. benchmark
  CL00,
  +0.80%
  up 62 cents, or 0.9%, at $70.91 a barrel. Gold futures
  GC00,
  -0.98%
  finished lower, falling 0.9%, to settle at $1,879.60 an ounce.
• European equities rose, with the pan-Continental Stoxx Europe 600
  SXXP,
  +0.65%
  up almost 0.7% for a record close. London’s FTSE 100
  UKX,
  +0.65%
  also rose almost 0.7%.
• In Asia, the Shanghai Composite
  SHCOMP,
  -0.58%
  fell 0.6%, while Hong Kong’s Hang Seng Index
  HSI,
  +0.36%
  gained 0.4% and Japan’s Nikkei 225
  NIK,
  -0.03%
  saw a fractional loss.