U.S. stocks continued their upward trajectory from the previous week supported by a cooler than expected consumer inflation report and sustained corporate earnings momentum. The Dow Jones Industrial Average (DJIA) eked out a small gain last week, up 0.15%. The S&P 500 also drifted higher, adding 1.77% and trading at all-time highs. Meanwhile, the Nasdaq Composite continued its strong performance on the year, up 2.46% for the week.

Economic indicators painted a nuanced picture of the recovery. Consumer spending showed resilience in some sectors but exhibited moderation in discretionary categories, indicating cautious consumer behavior amid economic uncertainty.

The Federal Open Market Committee (FOMC) kept the benchmark policy rate at 5.25%-5.50% at its June meeting. More significantly, the latest dot plot revealed that the FOMC’s median projection has removed two cuts from their 2024 rate projections. From the FOMC perspective, that leaves just one 25 basis point reduction this year - market expectations had been for the dot plot to show two cuts in 2024.

Data showed the consumer price index cooled for the second month in a row. The consumer-price index, a gauge for goods and service costs across the U.S. economy, rose 3.3% in May from a year ago, the Bureau of Labor Statistics reported. Core prices that exclude volatile food and energy items climbed 3.4% annually, lower than the consensus estimates. The latest inflation report may offer U.S. policymakers hope that inflation is resuming its downward trend, which would help pave the way for rate cuts.

Adding to the good news on inflation, the May PPI came in cooler than forecast on both headline and core measures, with lower inflation for goods, while services remained unchanged. The Producer Price Index held steady with 0% change in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported, lower than the 0.3% estimate. On an unadjusted basis, PPI moved up 2.3% for the 12 months ended in May, though below the 2.5% consensus estimate. Nearly 60%of the May decrease in the index for final demand goods can be traced to a 7.1% decline in prices for gasoline.

Looking ahead, retail sales, housing starts and PMI are on the calendar for this week, giving further insight into the impact of inflation on the consumer.