Closing Market Update

Published as of: May 17, 2024, 4:40 p.m. ET 

(Friday market close) Major U.S. equity benchmarks finished mixed Friday but still posted firm gains for the week as investors remained encouraged by signs inflation may be pulling back from an early 2024 uptick. The Dow Jones Industrial Average^® ($DJI) posted its third record-closing high of the week and ended above 40,000 for the first time.

The S&P 500^® index (SPX) notched its fourth straight weekly advance, fueled by renewed hopes for lower interest rates in the wake of Wednesday's cooler-than-expected Consumer Price Index (CPI) results. The CPI report, combined with signs of economic softening, prompted investors to dial up odds for Federal Reserve rate cuts before the end of the year. 

The latest sign of slower growth came earlier Friday when the Conference Board said its April Leading Economic Index^® (LEI) fell 0.6% to a six-month low.

"Another decline in the U.S. LEI confirms that softer economic conditions lay ahead," Conference Board economist Justyna Zabinska-La Monica said in a statement. While the Conference Board doesn't expect a recession, LEI trends "still point to serious headwinds to growth ahead."

"Indeed, elevated inflation, high interest rates, rising household debt, and depleted pandemic savings are all expected to continue weighing on the U.S. economy in 2024," she added.

Here's where the major benchmarks ended:

• The S&P 500 index rose 6.17 points (0.1%) to 5,303.27, up 1.5% for the week; the Dow Jones Industrial Average gained 134.21 points (0.3%) to 40,003.59, up 1.2% for the week; the Nasdaq Composite^® ($COMP) lost 12.35 points (0.1%) to 16,685.97, up 2.1% for the week.
• The 10-year Treasury note yield (TNX) rose more than 4 basis points to 4.42%, down about 8 basis points for the week.
• The Cboe Volatility Index^® (VIX) fell 0.43 to 11.99.

Among major companies, Nvidia (NVDA) dropped 2% Friday but still posted a 2.9% advance for the week ahead of the semiconductor leader's quarterly earnings Wednesday. Among sectors, energy shares led gainers behind a 1% jump in WTI Crude Oil (/CL) futures. The small-cap Russell 2000^® Index (RUT) ended little changed but still gained 1.7% for the week.

The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:

• Advanced Micro Devices (AMD) added 1.1% after Reuters reported Microsoft (MSFT) is planning to offer the company's artificial intelligence chips to cloud customers as an alternative to Nvidia. Microsoft shares ended 0.2% lower.
• Coinbase (COIN) gained 4.2% after Bank of America (BAC) upgraded the cryptocurrency platform to "neutral" from "underperform," saying the current macro environment "has been a positive for cryptocurrency market-cap appreciation and trading volumes."
• Cracker Barrel Old Country Store (CBRL) plunged more than 14% after the restaurant chain slashed its dividend to $0.25 per share from $1.30. 
• DuPont de Nemours (DD) rose 3% after Jefferies Group (JEF) upgraded the chemical company to "buy" from "hold," citing expectations for a "cyclical recovery" trade.
• Reddit (RDDT) rallied 10% after the social media platform announced a partnership with OpenAI. 
• Take-Two Interactive (TTWO) jumped 1.2% after the video game publisher reported stronger-than-expected quarterly bookings. 

Earnings season is almost finished, but a few big retailers will report quarterly results over the next two weeks. Those retailers include home improvement chain Lowe's (LOW) and department store Macy's (M), both scheduled to report results Tuesday. Wednesday brings earnings updates from two more retailers: Target (TGT) and TJX Companies (TJX).

This week's disinflationary, slowing-economy theme continued with a larger-than-expected drop in the Conference Board's LEI, which the group said reflected deterioration in consumers' outlook on business conditions, among other factors. The board projects real Gross Domestic Product (GDP) growth to slow to under 1% during the second and third quarters.

Earlier this week, housing starts and building permits both came out under analysts' expectations, as did the Philadelphia Fed Index, a measure of manufacturing activity in that region.

Despite the lower-than-expected April CPI readings earlier this week, inflation remains above the Fed's 2% long-term target. But an economic slowdown, combined with a resumption in the downward path of inflation seen in 2023, could set the stage for one or two Fed rate cuts later this year, analysts believe.

Late Thursday, traders priced roughly 66% odds fed funds rate will be at least one quarter-point lower following the Federal Open Market Committee's (FOMC) September meeting, up from 61% a week ago, based on the CME FedWatch Tool.

Continued "stickiness" in inflation raises several questions with global implications. Read more in "Schwab Market Perspective: The Pace of Rate Cuts."

Next week's economic calendar is relatively light, but a couple indicators could influence the market's outlook. Those indicators include durable goods orders for April and the University of Michigan's final Index of Consumer Sentiment for May, both scheduled for release next Friday.