What a Week: Upbeat Finish

The Commerce Department's weak April retail sales report Friday, along with a profit warning from Foot Locker (FL Quote), added to anxiety about consumer spending. In addition, former Fed Chairman Alan Greenspan told a business seminar there's a one-third chance the U.S. economy would slip into recession this year, Reuters reported.

Yet major averages rallied Friday, as the combination of weak retail sales and mild core PPI calmed fears the Fed might need to raise rates, and raised hopes for a rate cut before year-end.

On Friday, the Dow rose 0.8% to 13,326.22, while the Nasdaq gained 1.1% to 2562.55 and the S&P climbed 1% to 1505.85. The comeback was led by energy giants like ExxonMobil (XOM Quote) and chip stocks such as Nvidia (NVDA Quote).

Caron believes the Fed was right to keep rates unchanged and maintain its tightening bias, or a view that inflation remains a greater risk than a slowdown.

"I don't think things are bad enough to warrant easing at this time," she said. "The other reason the Fed is right to keep policy unchanged is because one of the most important things for the Fed is to maintain its inflation-fighting credibility. They've drawn a line in the sand and said 1% to 2% is the comfort zone for core PCE and it's still running above [that level].