Stocks Extend Rally on Upbeat Earnings, Strength In Consumer Spending
3:09 pm Friday, May 27th, 2022
U.S. stocks rallied on Friday, boosted by upbeat earnings, strength in consumer spending and signs that inflation was peaking, easing worries about a sharp slowdown in economic growth.
Economic data released this morning showed a smaller than expected increase in April Personal Income, but it also showed a deceleration in the yr/yr PCE Price Index, making for a positive contribution to investor sentiment ahead of a three-day weekend.
All eleven sectors sport midday gains with eight groups up at least 1.0% and four sectors holding gains of more than 2.0%. Top-weighted technology (+2.7%; +7.3% week-to-date) is the best performer, followed by real estate (+2.5%; +5.5% week-to-date) and the consumer discretionary sector (+2.3%; +8.1% week-to-date). Fittingly, two of these three sectors are also among this week’s best performers.
Retail stocks have been in focus as of late, with concerns about persistently high inflation pressuring costs. A handful of retailers reported their results since yesterday’s close, and while most disappointed, the market has shown resilience, reflecting some eagerness to buy battered down names. Ulta Beauty (ULTA) is the top performer in the discretionary sector after it bucked the trend, reporting better than expected results and guidance. Meanwhile, Gap (GPS) has turned positive after being down nearly 15.0% at the open. The company missed Q1 expectations and issued below-consensus guidance for the fiscal year, but also indicated that performance is expected to improve in the second half of the year.
Elsewhere, top-weighted technology has benefited from broad strength, including strong gains from heavyweights Apple (AAPL) and Microsoft (MSFT). Chipmakers have fared a bit better than the sector with the PHLX Semiconductor Index rising 3.3%, though both groups have gained 7.3% this week.
The solid gains in top-weighted components have masked another solid showing from the energy sector (+1.4%), which has climbed 7.8% this week, padding its May gain to 16.5%. Crude oil traded in the red in early action, but it has recovered to trade up $0.49, or 0.4%, at $114.58/bbl.
