Stocks continued their rally on Friday, capping off another winning week. The tech-heavy Nasdaq Composite and the benchmark S&P 500 both climbed by over 1%, while the Dow Jones Industrial Average also saw gains of over 0.7%. Despite the positive performance, Citi managing director Scott Chronert noted that the recent rally has been relatively unloved, with little in the way of flows from investors. Equity mutual funds and ETFs faced outflows of $8.4 billion for the week, marking a seven-week streak of outflows.
Investors are now turning their focus to next week’s Consumer Price Index (CPI) report, which is expected to show a deceleration in headline inflation to 3.3% from September’s 3.7%. On a core basis, which excludes food and gas, prices are expected to rise by 4.1% annually, signaling slower progress on inflation. Wells Fargo expects core CPI to continue rising at around 3% annually, emphasizing that slower inflation in the coming months does not necessarily indicate victory on inflation.
Consumer inflation expectations have also reached their highest level since 2011, according to the University of Michigan’s latest reading on consumer sentiment. Expectations for long-run inflation rose to 3.2% over the next five years, up from 3% last month. Oxford Economics warned that elevated inflation expectations would be concerning to the Federal Reserve, as it indicates the need for higher interest rates for a longer period of time.
In the cryptocurrency market, Bitcoin prices steadied after surging close to $38,000 on Thursday, while Ethereum jumped about 5% to trade near $2,100. The rise in Ethereum came after BlackRock filed for an Ethereum ETF with the Nasdaq, highlighting the growing interest in digital currencies.
Overall, despite concerns about inflation and outflows from equity funds, stocks managed to rally and end the week on a positive note. Investors will be closely watching the upcoming CPI report for further insights into the state of the economy and the Federal Reserve’s potential interest rate decisions.
