US stocks climbed on Friday as a surprise jump in manufacturing data and easing concerns over the trade war boosted investor sentiment. The rally came after a volatile week that saw gold prices plunge the most in six years.
Factories Defy Recession Fears
The latest economic data showed US factory activity unexpectedly expanded in May, defying fears of a looming recession. The Institute for Supply Management's manufacturing index rose to 52.1, up from 51.9 in April and beating economists' forecasts of a decline.
What this really means is that the US economy still has some underlying strength, despite the drumbeat of negative news around trade tensions and a potential slowdown. The manufacturing rebound suggests businesses are continuing to invest and expand, at least for now.
Gold Selloff Eases
Meanwhile, the selloff in gold prices showed signs of stabilizing, with the precious metal clawing back some of its recent losses. Gold fell over 5% this week, its biggest weekly decline since 2019, as stronger economic data reduced demand for safe-haven assets.
The bigger picture here is that investors are starting to regain confidence in riskier assets like stocks, even as uncertainty over trade policy lingers. As Reuters reports, progress in US-China and US-EU trade negotiations has boosted market optimism and driven a shift away from gold.
Stocks Climb, but Risks Remain
All three major US stock indexes closed higher on Friday, with the S&P 500 and Nasdaq reaching new record highs. However, as this recent analysis noted, risks to the market remain, including the potential for a more hawkish Federal Reserve.
As cubefacts recently covered, the Michigan economy is also facing headwinds, underscoring the uneven nature of the recovery. And this article highlights the damaging impact that immigration enforcement is having on parts of the Midwest.
So while the latest market rally is encouraging, investors would be wise to remain cautious given the mixed economic signals and ongoing policy uncertainty.