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MANHATTAN (CN) — Investors pushed forward this week on news of another Iran-U.S. ceasefire, which caused oil prices to drop to the lowest levels in more than a month.
Rumors of a potential ceasefire helped lift markets throughout the week, with a tentative truce on Friday adding momentum. Brent crude fell to about $91, its lowest level since mid-April. The Dow Jones Industrial Average gained 448 points for the week, while the S&P 500 and Nasdaq rose 106 and 629 points, respectively.
Other economic indicators pointed in the opposite direction, including hotter inflation, growing expectations that the Federal Reserve will not cut rates in 2026 and weakening consumer confidence.
On Thursday, the Bureau of Economic Analysis reported that personal consumption expenditures inflation reached a three-year high, though the increase was smaller than expected. Headline inflation edged up to 3.8% in April, matching forecasts.
The PCE price index rose 0.4% last month, below the 0.5% economists expected and down from March’s 0.7% increase. Excluding food and energy, which remain particularly volatile, core PCE rose just 0.2%.
Personal income was unchanged, even as spending increased 0.5% and the household savings rate fell from 3.2% to 2.6%.
The agency also revised first-quarter gross domestic product growth down to 1.6% from the previously reported 2%. The weaker reading disappointed Wall Street, which had already greeted the original estimate with little enthusiasm.
“We are far from stagflation, but rising inflation coupled with slowing growth is the opposite of what we want in both dimensions,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management, adding that both reports threw more cold water on hopes for an interest rate from the Federal Reserve this year.
Confidence among both consumers and businesses dipped again, owing to price shocks from the conflict in Iran.
On Tuesday, the Conference Board’s monthly consumer confidence index fell to 93.1 points for May, while the “present situation” index fell 3.2 points. While the “expectations” index rose a single point, the perception of the labor market ticked down by 0.6 points.
“Consumer appraisals of current business conditions and the current labor market were moderately less positive compared to last month,” Dana Peterson, the board’s chief economist, said in a statement.
The board’s quarterly CEO confidence index painted a worse picture, as the index fell back into negative territory for the second quarter of the year. Chief executives also increasingly plan to hire less and fire more over the next 12 months, the survey found.
“CEO’s reported that the economy is materially worse now than it was six months ago and expected economic conditions to weaken further over the next six months,” Peterson said.
A new survey by the National Federation of Independent Business also found construction, manufacturing, retail and service industries all feel worse about the economy than they did during the first quarter of the year, with rising oil prices and other inflationary pressures the main culprits. Manufacturing, in particular, saw the largest decline, with many respondents reporting low sales expectations and saying it was not a good time to expand their businesses.
However, the trade group noted while optimism is lower, more than half of small business owners rated the health of their businesses as at least good.
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