Stimulus Optimism Fuels Market Rally Despite Inflation and Jobless Claims: A Weekly Recap

Despite a slight dip on Friday, global stock markets recorded impressive gains over the week. Investors’ buoyed spirits are credited to the Federal Reserve’s temporary halt on rate hikes and China’s commitment to vigorous economic stimulus.

Inflation Indicators Reinforce Market Optimism

Several crucial inflation indicators reinforced positive market sentiment throughout the week. The consumer price index (CPI) report for May reflected a year-over-year (Y/Y) slowdown in both the headline and core CPI figures. Similarly, the producer price index (PPI) report for May indicated a larger-than-forecasted decline on a month-over-month (M/M) basis, and a lag behind the Y/Y consensus.

Unexpected Rise in Jobless Claims – A Transient Setback?

Unexpectedly, the number of Americans applying for weekly jobless benefits surged, indicating potential vulnerabilities in an otherwise resilient labor market. Despite the Federal Reserve’s hint at future rate hikes, investors chose to overlook this, predicting that the central bank would soon need to put a stop to its aggressive tightening cycle.

Major Indices Celebrate a Victorious Week

Major market indices celebrated significant victories this week. The Dow Jones average ascended 1.3%, the S&P 500 rose by 2.6%—marking the index’s fifth consecutive weekly gain and its best performance since March. The Nasdaq Composite also soared, registering a 3.3% leap, marking its eighth consecutive week of gains. Remarkably, the S&P and Nasdaq reached their highest levels since April 2022 this week.