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S&P 500 Posts Record Close as Wall Street Assesses Inflation Risks

The S&P 500 posts its second record close in a row as investors assess the Federal Reserve's stance that inflation spikes will prove to be transitory.

The S&P 500 on Friday posted its second consecutive record closing high with investors assessing the Federal Reserve's stance that inflation spikes will prove to be transitory.

The Dow Jones Industrial Average rose 13 points, or 0.04%, to 34,480, the S&P 500 rose 0.19% to 4,247 and the Nasdaq gained 0.35%.

For the week, the Dow fell 0.8%, the S&P 500 ticked up 0.4%, and the Nasdaq jumped 1.8%.

The S&P 500 also posted a record close on Thursday as investors shook off hotter-than-expected inflation data for May. Near-term price pressures are being seen in categories that will benefit from the economy's recovery but they aren't expected to persist.

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"There are plenty of indicators pointing to near-term spike in inflation - acute labor shortage, supply chain constraints, and cyclical highs for commodity prices," said Anu Gaggar, senior global investment analyst at Commonwealth Financial Network.

"However, the belief remains that these are cyclical pressures that are to be expected when an economy is in the early stages of a strong rebound. As the cycle matures, these inflation pressures will subside owing to the structural forces that have kept inflation low for long," Gaggar added.

Consumer prices last month increased at the fastest pace in more than a decade, according to data from the Labor Department.

The fear on Wall Street has been that rising price pressures could challenge the Federal Reserve's accommodative stance as the world's biggest economy continues its recovery from the COVID-19 pandemic.

Still a matter for debate is whether bond yields are in retreat because investors have been buying into the Federal Reserve's narrative that inflation pressures will ease over the second half of the year, or they're worried that supply chain bottlenecks and labor market shortages will hold back growth. 

The yield on the benchmark 10-year U.S. Treasury yield Friday rose slightly to 1.46%. Earlier it had dipped below 1.43%, the lowest point since early March.

Bonds and Bottlenecks: Yield Slump Says Fed Right on Inflation. For Now.

Vertex Pharmaceuticals  (VRTX) - Get Report finished down 11% Friday after the company halted a closely watched effort to develop a therapy for a rare genetic disorder that affects the lungs and liver.