Stocks opened lower Friday as Wall Street weighed signs of increased hostility between the U.S. and China against economic data that signaled easing inflation and stabilizing consumer sentiment.
Included in the news hinting at rising tensions between the U.S. and China was a Bloomberg report that the Trump administration is preparing for broader sanctions for the Chinese tech sector.
The expanded restrictions would target subsidiaries of China's biggest technology companies that are being used to circumvent current sanctions.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Additionally, President Donald Trump raised some eyebrows after posting on Truth Social that China "HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!"
Earlier this month, the two countries agreed to a 90-day truce that drastically lowered retaliatory tariffs.
But the main benchmarks finished well off their intraday lows after President Trump told reporters on Friday that he is sure he'll speak to Chinese President Xi Jinping and "hopefully we'll work that out."
At the close, the blue chip Dow Jones Industrial Average was up 0.1% at 42,270, while the broader S&P 500 ended fractionally lower at 5,911, and the tech-heavy Nasdaq Composite fell 0.3% to 19,113.
All three indexes finished the week and the month higher.
Inflation nears the Fed's target
Ahead of the opening bell, data from the Bureau of Economic Analysis showed the Personal Consumption Expenditures (PCE) Price Index – the Fed's preferred measure of inflation – was up 0.1% month over month in April and 2.1% year over year.
The annual increase is lower than March's 2.3% and within striking distance of the Federal Reserve's 2% inflation target.
Core PCE, which excludes volatile energy and food prices, also rose by 0.1% on a monthly basis and was 2.5% higher year over year.
"Inflation came in reasonably subdued as expected," says Scott Helfstein, head of investment strategy at Global X.
"This is yet another good report for the Fed and could give them latitude for another rate cut late summer, though they are predisposed to be patient and let events play out," Helfstein adds.
Consumer sentiment stops falling
Meanwhile, the University of Michigan said its Consumer Sentiment Index was unchanged from April to May, remaining at 52.2.
This is an improvement over the preliminary reading of 50.8, which would have been the lowest reading on record going back to 1952 if it had held.
The report indicated that consumers' outlook improved after the U.S.-China trade truce, though sentiment remains at historically low levels, having fallen 24.5% year over year.
"Overall, consumers see the outlook for the economy as no worse than last month, but they remained quite worried about the future," says Joanne Hsu, director of the surveys of consumers at the University of Michigan.
Ulta shines after beat-and-raise quarter
In single-stock news, Ulta Beauty (ULTA) was the best S&P 500 stock on Friday, rallying 11.7% after the cosmetics retailer reported better-than-expected fiscal first-quarter earnings thanks to strong sales of budget-friendly options from e.l.f. Beauty (ELF), as well as celebrity brands.
The company also raised its full-year profit forecast and lifted the top end of its comparable-sales outlook.
Ulta's results mark "a major earnings upside surprise" in a "difficult beauty backdrop," says Oppenheimer analyst Rupesh Parikh.
The analyst lifted his price target on the consumer discretionary stock to $510 from $465, noting that he's "increasingly confident" in Ulta's ability to reaccelerate same-store sales "and drive a major profit inflection in fiscal 2026."
Parikh's new price target represents implied upside of almost 9% to today's closing price.
As for other retail stocks moving on earnings Friday, membership club Costco Wholesale (COST) gained 3.1% on its earnings beat. Apparel retailer Gap (GAP) plunged 20.2% after saying tariff costs could reach $250 million to $300 million.
Related content
- The United and JetBlue Partnership: Everything We Know About Blue Sky So Far
- Earnings Calendar and Analysis for This Week
- When Is the Next Jobs Report?
-
Why I Trust Bonds, Even NowColumnist Jeffrey Kosnett explains why he stands by investing in bonds.
-
An Estate Planning Attorney's Guide to the Importance of POAsRegularly updating your financial and health care power of attorney documents ensures they reflect your current intentions and circumstances. It's also important to clearly communicate your wishes to your chosen agents.
-
Divorce and Your Home: An Expert's Guide to Avoiding a Tax BombYour home is probably your biggest asset, so if you're getting a divorce, the stakes are high. Keep it? Sell it? You need to have a good plan in place for how to handle it.
-
Stock Market Today: Stocks Grapple for Peace Trade GainsOf course dramatic tension is high on Fed Day, only this time it's about war and peace as well as monetary policy.
-
Fewer Agents, Fewer Audits: How IRS Staff Cuts Are Changing EnforcementSignificant reductions in the IRS workforce appear to be increasing the number of 'no change' audit closures. The shift could potentially increase the overall tax gap — the difference between taxes that should have been paid and those that were.
-
What if You Could Increase Your Retirement Income by 50% to 75%? Here's HowCombining IRA investments, lifetime income annuities and a HECM into one plan could significantly increase your retirement income and liquid savings compared to traditional planning.
-
Here's Why You Shouldn't Do an Estate Plan Without a Financial PlannerEstate planning isn't just about distributing assets. Working with a financial adviser can ensure you've considered the big picture — and the finer details.
-
Stock Market Today: Rally Pauses for "Real End" to Middle East WarThe future is uncertain by nature, but it's hard to recall a time when views on what's next have been this volatile from day to day.
