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US markets closed higher on Friday
May-20-2017

The US markets closed higher on Friday, for a second straight session, but closed in negative territory for the week, unable to fully bounce back from sharp losses in the middle of the week sparked by White House drama. Investors have been focusing on the fundamental strength of first-quarter earnings and reports of the economy, which have offered signs of steady, if not robust, growth. Still, investors have increasingly questioned whether President Trump can deliver on his economic stimulus promises amid investigations. The New York Federal Reserve raised its outlook on US economic growth in the second quarter, citing positive surprises from industrial production and capacity utilization data in April which helped offset last month’s drop in home construction. The New York Fed’s ‘Nowcast’ program showed that the US gross domestic product was on track to expand at an annualized pace of 2.32 percent, faster than the prior estimate of 1.88 percent on May 12.

Meanwhile, a Federal Reserve survey released showed that the overall financial situation of US households continues to improve but Americans without a college degree feel they are struggling more compared to a year previously. The annual survey, which was conducted in October 2016, is now in its fourth year and acts as a temperature check on the financial wellbeing of US families. Seventy percent of those surveyed said that they were living comfortably or doing okay, an improvement from 69 percent the prior year and 62 percent in 2013. The improving statistics in part reflect a buoyant jobs market. Since the last survey the unemployment rate has declined to 4.4 percent from 5.0 percent, and is now near what many economists would consider full employment.

Moreover, St. Louis Federal Reserve President James Bullard said that the Fed’s expected plans for rate increases may be too fast for an economy that has shown recent signs of weakness, making the case for a continued go-slow approach as inflation progress stalls. A recent dip in inflation and inflation expectations means the Fed may not make as much progress as expected toward its inflation target, and at a time when risks are increasing that political gridlock in Washington will continue. Bullard added that recent events in Washington, on their own, have not changed his expectations for an economy anticipated to slog along at a 2 percent annual growth rate. But they have coincided with weaker inflation, and a dip in long-term bond yields that seem counter to the Fed’s faith it should continue to raise interest rates.

The Dow Jones Industrial Average gained 141.82 points or 0.69 percent to 20,804.84, Nasdaq added 28.57 points or 0.47 percent to 6,083.70, while S&P 500 edged higher by 16.01 points or 0.68 percent to 2,381.73.

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