A worse-than-expected reading on consumer sentiment kept a lid on stocks Friday, though the main indexes extended their weekly win streaks. The price action could pick up next week with several key inflation readings and an appearance from Fed Chair Jerome Powell on the docket.
The main indexes opened comfortably higher this morning but fell to their session lows after the University of Michigan said its Consumer Sentiment Index plunged to 67.4 in May from April's reading of 77.2.
"While consumers had been reserving judgment for the past few months, they now perceive negative developments on a number of dimensions," the report stated. "They expressed worries that inflation, unemployment and interest rates may all be moving in an unfavorable direction in the year ahead."
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The data also showed that both short-term and long-term inflation expectations edged higher this month.
The Consumer Sentiment Index was a "double whammy" for the Fed, says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. If consumer spending slows and inflation accelerates, "we'll get the opposite of the Goldilocks scenario that many were hoping for, and the Fed will be in an especially difficult position of choosing between accommodating a slowing economy and fighting increasing inflation expectations," Zaccarelli explains.
Sweetgreen soars after beat-and-raise quarter
Market participants also sifted through this week's final batch of corporate earnings reports. Fast-casual restaurant chain Sweetgreen (SG) surged 34% after the company beat on the top line and raised its full-year forecast. SG also said it is rolling out steak options nationally for the first time following a successful trial run in Boston.
"We believe SG represents an early stage generational growth story armed with a model in early innings of a powerful revision cycle," says Oppenheimer analyst Brian Bittner (Outperform, the equivalent of Buy), adding that Sweetgreen's quarterly results are "consistent with our 'top pick' thesis."
Novavax more than doubles on Sanofi partnership
Novavax (NVAX) was another notable post-earnings gainer, nearly doubling (+98.9%) in value Friday. While the drugmaker said first-quarter revenue rose 16% year-over-year and its net loss narrowed from Q1 2023, it was the disclosure of a new billion-dollar licensing agreement with Sanofi (SNY, +1.2%) that lit a fire under NVAX.
Under the terms of the deal, Sanofi will sell Novavax's current COVID-19 vaccine while the two companies co-develop a COVID-19/influenza combination vaccine.
On the negative side of the ledger, Akamai Technologies (AKAM) slumped 11% after the cloud services firm's lower-than-expected Q1 revenue and Q2 guidance offset a first-quarter earnings beat.
As for the main indexes, the Dow Jones Industrial Average closed up 0.3% at 39,512 – its eighth consecutive gain – the S&P 500 was 0.2% higher at 5,222, and the Nasdaq Composite had slipped 0.03% to 16,340. It was a third straight weekly win for the S&P 500 and Nasdaq, and the fourth straight for the Dow.
Powell, CPI, Walmart earnings on deck
Next week's jam-packed economic calendar and notable earnings lineup could spark volatility in the stock market. Investors are most interested in Fed Chair Powell's early morning speech on Tuesday. An update on wholesale prices is also slated for release that day, while the April Consumer Price Index (CPI) is due Wednesday morning.
Investors will also see how sticky inflation is impacting consumers' spending behavior thanks to quarterly results from blue chip retailers Home Depot (HD, -0.3%) and Walmart (WMT, +0.1%).
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