✅ Written by Austin DeNoce, Markets Reporter, Walk-On Holdings

✅ Edited by Casimir Stone, Creative Director Walk-On Holdings

Inflation Steady as Fed Monitors: Mixed Economic Signals and Market Reactions

This week in U.S. markets, all three major indexes retreated from their record highs made last week as Treasury yields inched higher and the technology and chip sectors corrected lower.

In economic news, Core Personal Consumption Expenditures (PCE) showed prices increased 2.8% annually and 0.2% month-over-month in April, roughly in line with expectations. This inflation metric is the most closely watched by the Federal Reserve, and thus, carries the most weight in the central bank’s interest rate policymaking decisions.

Headline PCE, which includes more volatile food and energy prices, also came in as expected at 2.7% annually and 0.3% from the previous month. Meanwhile, personal income increased 0.3% from March, while personal spending rose 0.2%. Overall, the figures showed prices increasing more or less as anticipated, providing markets some relief to end the week.

In a less-promising report, the second estimate for Q2 GDP growth came in at 1.3%, below initial estimates of 1.6%, mostly due to a downward revision in consumer spending. This further stoked concerns that the tricky combination of persistent inflation and high interest rates may be catching up with American consumers.

Fed Speak didn’t do much to quell these fears. Minneapolis Federal Reserve President Neel Kashkari said he thinks the Fed should wait for several months of positive inflation data before deciding to cut interest rates. New York Fed President John Williams also noted a lack of progress on inflation, but added that he still expects prices to resume their trend lower later in the year.

In housing news, the Case-Shiller 20-city home price index showed prices in March rose 7.4% year-over-year and 1.6% month-over-month. Meanwhile, the Federal Housing Finance Agency’s House Price Index added 6.6% from Q1 2023 to Q1 2024, hitting a record high. The 30-year mortgage rate last week also increased to 7.05%, its first move higher in four weeks.

In company news this week, sports betting platform DraftKings saw its shares tumble after the Illinois Senate passed a new 2025 budget that included a higher sports betting tax. Shares of GameStop jumped following an announcement that it raised almost $1 billion from a stock sale, capitalizing on its recent surge.

American Airlines cut its second-quarter profit forecast on weaker pricing power, despite high travel demand. A UnitedHealth executive pointed to a “disturbance” in the company’s Medicaid business that rattled the healthcare sector. And on the M&A front, ConocoPhillips agreed to buy Marathon Oil for $17 billion in hopes of improving its presence across several Midwestern shale fields.

In the retail sector, Abercrombie & Fitch, Dick’s Sporting Goods, and Gap all saw their stocks surge after beating earnings estimates and raising their forecasts. Pet retailer Chewy also announced a $500 million stock buyback plan.

In tech, shares of Slack-owner Salesforce tumbled after reporting its first sales miss since 2006 and offering a lackluster second-quarter forecast, although it recovered some of those losses to end the week. Tesla had a rollercoaster week.

Investors responded positively to a Reuters report that the EV leader is in the process of registering its Full Self-Driving software with Chinese authorities, but the stock closed down on Friday after a proxy firm, ISS, urged Tesla shareholders to vote against CEO Elon Musk’s multi-billion dollar pay package.

Elsewhere, it was a tale of two PC makers, as HP saw its stock jump after forecasting solid adoption for its AI PCs, while Dell shares tumbled over investor worries around its lower-than-expected AI server backlog. Finally, shares of Trump Media fell sharply after former President Donald Trump was convicted of felony crimes related to a hush money payment in 2016.