MANHATTAN (CN) — Wall Street had a mixed week of trading but ended in positive territory, as investors entered the summer months with the needle pointing to a slight economic slowdown.
Earlier in the week, artificial intelligence company Nvidia briefly became the world’s most valuable company, overtaking other tech giants such as Microsoft and Apple. However, Nvidia’s stock saw a troubling decline on Friday as investors sought to short its value, shaving some $220 billion from its market capitalization.
Markets generally saw moderate increases and decreases this week. By the closing bell on Friday, the Dow Jones Industrial Average rose 560 points, while the S&P 500 grew by 33 points and the Nasdaq gained a single point.
“The big story of this bull market has been the resilient consumer, and without them the economy would have slowed — or fallen into recession — a long time ago,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. “Without the consumer, this bull market is going to stall out.”
Other economic data this year indicate the back half of 2024 will see noticeably less economic growth than the first half did.
On Friday, the Consumer Board released its economic indicators index for May, which showed another drop in sentiment, this time by 0.5%. While the index doesn’t show a recession, yet, it has remained in negative territory for the past six months.
“May was an inflection point for the U.S. economy, with consumer sentiment, consumer spending, unemployment and inflation all pointing toward a slowdown in economic activity,” said Gregory Daco, chief economist at EY Parthenon.
He added that “stagflation is a downside risk that could emerge from a spike in energy prices, geopolitical tensions or escalating trade tensions.”
The slowdown was seen elsewhere, too. On Tuesday, the U.S. Census Bureau’s monthly report on retail sales showed consumers opened their wallets just a little bit more than last month, to the tune of a 0.1% increase in spending. While that shows retail sales are still in a slowdown, it is better than the 0.2% decrease in retail sales for April.
Core retail sales, which excludes food and gasoline, jumped by a more impressive 0.4% in May, but April’s numbers also were revised downward by a more distressing 0.5%.
“With services consumption growth slowing in recent months and consumer confidence plummeting again, maybe households aren’t quite as impervious to higher interest rates as we were beginning to believe,” Paul Ashworth, chief North America Economist Capital Economics, wrote in an investor’s note.
Zaccarelli noted that the slowdown in retail sales may be good news for inflation hawks crowing for an interest rate cut. However, he noted, it also points to a slowdown in growth, “which would hurt a lot more than a couple of interest rate cuts would help.”
Fortunately, the Empire State Manufacturing Index grew this month, from negative 15.6 to negative 6 points, better than was forecast. More impressively, the six-month activity outlook more than doubled from 14.5 to 30.1.
“Business in the manufacturing sector in the [New York Federal Reserve] District remains weak but hopes for a turnaround rose to an over-two-year high,” wrote Peter Boockvar, chief investment officer at Bleakley Financial Group. “Let’s hope as this industry has been in a recession for about two years now.”
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