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S&P 500 at Record Close as Data Ease Inflation Worries

The S&P 500 sets a record high on Friday amid optimism about the U.S. economic recovery.

The S&P 500 closed at a record in mixed trading Friday amid optimism about the U.S. economic recovery.

Sentiment was boosted by the announcement of a roughly $1 billion bipartisan infrastructure deal and a report on inflation that came in as expected.

The Dow Jones Industrial Average finished up 237 points, or 0.69%, to 34,433 and S&P 500 gained 0.33% to 4,280. The Nasdaq moved in and out of positive territory during the session before ending down 0.06%.

For the week, the Dow jumped 3.4%, the S&P 500 added 2.7% and the Nasdaq rose 2.4%.

The personal consumption expenditures price gauge - the Federal Reserve's preferred inflation measure - rose 0.4% in May, below forecasts. The data eased worries about a rapid rise in prices as the U.S. economy makes its way out of the COVID-19 pandemic. 

Personal spending, meanwhile, was unchanged last month and trailed forecasts.

"We don’t believe that this data will impact the Fed’s current plans for reducing extraordinary stimulus (i.e. “tapering”) and rate hikes," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

"They haven’t publicized their plans explicitly, but between the most recent Dot Plot and Fed speeches, they have shown interest in beginning a tapering plan in the next six to 12 months (and announcing that plan within three to six months) and potentially raising rates as soon as 18 months from now," he added.

Nike  (NKE) - Get Report finished 15% higher on Friday after the world's biggest sports apparel company forecast 2022 sales of more than $50 billion on the back of better-than-expected fourth-quarter earnings.

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FedEx  (FDX) - Get Report declined 3.6% after saying cost pressures including labor and fuel costs could weigh on future earnings.

The yield on the benchmark 10-year Treasury note rose early Friday to 1.541%.

Stocks set records Thursday after President Joe Biden announced a tentative agreement on the infrastructure plan, which will cost $973 billion over five years, or $1.2 trillion over eight years. It includes $579 billion of new spending.

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Biden and a group of 10 centrist senators will now attempt to move the deal through Congress alongside a broader package that would spend trillions more on what the president called “human infrastructure.”

Markets have calmed this week following assurances from Federal Reserve Chairman Jerome Powell that the central bank would remain accommodative and wasn't close to raising interest rates.

Shares of large U.S. banks such as Wells Fargo  (WFC) - Get Report and Bank of America  (BAC) - Get Report rose Friday after the Federal Reserve said banks “continue to have strong capital levels and could continue lending to households and businesses during a severe recession.”

The Federal Reserve released its annual stress-test report on Thursday.

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