US stocks lost steam in mid-morning trading on Friday after consumer sentiment hit a six-month low.
The Dow Jones Industrial Average (^DJI), which is eyeing its eighth straight win, clung to gains of roughly 0.2%, with the benchmark S&P 500 (^GSPC) hovering above the flatline on the heels of closing above 5,200 for the first time in a month. The tech-heavy Nasdaq Composite (^IXIC) declined around 0.1%.
The latest University of Michigan consumer sentiment survey released Friday revealed a 13% drop in overall sentiment during the month of May. The index reading for the month came in at 67.4, its lowest level in six months, and well below economist expectations of 76.2.
The drop in sentiment comes as investors debate the future of interest rate cuts amid recent signs of a cooling labor market.
Read more: How does the labor market affect inflation?
Given that, investors will listen closely to speeches from a packed lineup of Fed speakers on Friday for more insight into timing, pace, and chance of an easing in policy. Michelle Bowman, Neel Kashkari, and Austan Goolsbee are among those scheduled to appear.
Earlier, Atlanta Fed boss Raphael Bostic said he sees a single rate cut late this year but echoed fellow official Mary Daly’s preference for waiting for a more robust signal that price pressures are easing.
On the corporate front, TSMC (TSM) shares popped after the Taiwanese contract chipmaking giant said its sales jumped 60% in April. It credited sustained AI demand paired with a revival in consumer electronics such as smartphones.
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Fed’s Michelle Bowman echoes higher for longer mantra
Federal Reserve Governor Michelle Bowman said Friday she believes interest rates need to stay where they are “for a bit longer.”
“It is of utmost importance that we maintain credibility in pursuing our fight against inflation by proceeding carefully and deliberately to achieve our 2% goal,” Bowman said while speaking in Arlington, Texas.
“I think we need to be where we are for a bit longer,” she added. “And if we don’t see progress on inflation, then I think we really need to be thinking about what we need to do from there.”
The comments echo similar sentiments from other Fed officials in recent weeks that interest rates will likely need to stay where they are until more data shows inflation is safely on the path down towards its 2% inflation target.
The Federal Reserve kept interest rates unchanged last week but warned inflation is still too high to cut.
In its statement, members say, “Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.”
US Federal Reserve Governor Michelle Bowman attends a “Fed Listens” event at the Federal Reserve headquarters in Washington, DC, on October 4, 2019. – US unemployment has stayed low despite rising interest rates and easing inflation, representing a “hopeful sign” that consumer prices can come down without a significant downturn, Bowman said on January 10, 2023. (Photo by Eric BARADAT / AFP) (Photo by ERIC BARADAT/AFP via Getty Images) (ERIC BARADAT via Getty Images)
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