Stocks ended a choppy session higher, eking out a fresh record high on Friday as investors looked beyond a stronger-than-expected print on inflation.

The S&P 500 set a new record closing high, topping its previous record level from Thursday. The Dow and Nasdaq also ended in positive territory. The 10-year yield dipped back below 1.5%. 

The Bureau of Labor Statistics reported on Thursday that its headline consumer price index rose by 5.0%, or by the most since 2008, in May. Core consumer prices, which exclude volatile food and energy prices, surged at the fastest rate since the 1990s, extending gains after an already strong April report.

U.S. stocks reacted less negatively to the report than they had in April, however, with the S&P 500 jumping to a new record high. 

“The inflation outlook has rightfully been top of mind since last month’s blowout report,” LPL Financial Chief Market Strategist Ryan Detrick said in a note Thursday. “Under the hood, though, we think the picture is a bit more sanguine than the headlines would suggest, and still believe inflation will be relatively well-contained over the intermediate-to-long term.”

Investors have taken into account recent commentary from Federal Reserve officials around inflation. Many have said they see price increases as only transitory jumps off last year's pandemic-depressed lows, and have telegraphed a willingness to tolerate a period of above-target – or above 2% – inflation following years of undershooting. Next week's Federal Reserve policy decision may help further reaffirm this stance, and solidify that the central bank still believes the economy has a ways to go in recovering from the pandemic before the Fed moves to adjust its pull back on its quantitative easing program or raise rates. 

"I think that investors may have had some concern that if inflation was too hot that there would be fears of Fed tightening and a real significant tightening of financial conditions and that would weigh on equities," Brian Levitt, Invesco global market strategist, told Yahoo Finance. "I would argue that it's a market that's saying, yea it's inflationary, it's not going to get out of hand. You may see some steps to normalize policy over time."

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"I think what we'll find as the year progresses is that growth is strong, there is some pricing pressure, but the Fed's going to let it run … and cyclically, rates should move higher from here. That's not to say that rates are going to 2.5% or 3%," he added. "We're still going to be in a structurally low interest rate environment, probably for a lot of the rest of our careers if not the rest of our lives. But cyclically, I don't see why rates shouldn't move higher in an improving growth backdrop in which the Fed is telling us that they're not going to be raising short rates for a while." 

4:01 p.m. ET: Stocks end session higher

Here's where markets were trading after market close on Friday:

  • S&P 500 (^GSPC): +8.29 (+0.2%) to 4,247.47

  • Dow (^DJI): +14.41 (+0.04%) to 34,480.65

  • Nasdaq (^IXIC): +49.09 (+0.35%) to 14,069.42

3:39 p.m. ET: 'We would look for more downside than upside' through September 

Though the S&P 500 is hovering at record highs, the level belies what has really been sideways trading over the course of the past several weeks. The blue-chip index is on track to close out the week higher by less than 0.5%. 

Prior to this week, however, "What really drove this rally was low real yields, continued support from central banks, positive seasonality — you just can't dismiss it," Stifel's Barry Bannister told Yahoo Finance. "November to April is stronger than May to October." 

“We had said … that the S&P would go flat, and this 4,200 is its best case, and then possibly fall as much as 10% if there’s a misstep on policy," Bannister said. "So far the central banks seem to be running scared. The European Central Bank is continuing the PEP program, the emergency purchase program, and the Fed is reticent to even talk about talking about tapering."

"So we've got the support of the central banks. The only issue is, the one thing that's being ignored is China has been tightening policy," he added. "That does affect the cyclical trade, that does affect global GDP." 

"The Chinese tightening will be in full effect, and the Fed will be forced to make some sort of announcement on when they're going to taper," he said. "We would look for more downside than upside as you go through September of 2021." 

3:09 p.m. ET: Bipartisan group of House lawmakers unveils antitrust legislation aimed at Big Tech 

A bipartisan group of lawmakers in the U.S. House of Representatives unveiled news antitrust legislation on Friday that would rein in the power of major technology companies including Amazon, Alphabet, Apple and Facebook. 

The package of bills would prohibit "acquisitions of competitive threats by dominant platforms," among other measures. The legislation — which would still need to clear the Judiciary Committee, full House, Senate and President Joe Biden — comes following renewed scrutiny over the power wielded by these platforms, and whether previous mergers were completed as a move to thwart potential competitors. 

“Right now, unregulated tech monopolies have too much power over our economy," Antitrust Subcommittee Chair David Cicilline said in a statement. They are in a unique position to pick winners and losers, destroy small businesses, raise prices on consumers, and put folks out of work. Our agenda will level the playing field and ensure the wealthiest, most powerful tech monopolies play by the same rules as the rest of us.”

10:19 a.m. ET: Consumer sentiment recovers in early June: University of Michigan 

Consumer sentiment rebounded in early June after declining in May, with consumers eyeing a strong economic rebound and the likelihood of a further drop in unemployment in the coming months. 

The University of Michigan's closely watched index of consumer sentiment rose to 86.4 in June from 82.9 in May, according to the institution's preliminary monthly index. Consensus economists were looking for an increase to just 84.2, according to Bloomberg data. 

"The early June gain was mainly among middle and upper income households and for future economic prospects rather than current conditions," Richard Curtin, chief economist for the Surveys of Consumers, said in a press statement. "Stronger growth in the national economy was anticipated, with an all-time record number of consumers anticipating a net decline in unemployment. Rising inflation remained a top concern of consumers, although the expected rate of inflation declined in early June." 

9:30 a.m. ET: Stocks open higher 

Here's where markets were trading after the opening bell Friday morning: 

  • S&P 500 (^GSPC): +5.42 (+0.13%) to 4,244.60

  • Dow (^DJI): +78.03 (+0.23%) to 34,544.27

  • Nasdaq (^IXIC): +8.92 (+0.06%) to 14,029.25

  • Crude (CL=F): +$0.15 (+0.21%) to $70.44 a barrel

  • Gold (GC=F): -$9.10 (-0.48%) to $1,887.30 per ounce

  • 10-year Treasury (^TNX): -0.9 bps to yield 1.45%

8:53 a.m. ET: 'We don't expect higher inflation to derail U.S. equities': Economist 

Concerns around inflation and higher rates have come down significantly among equity investors, with markets trading at record highs even as core consumer price inflation surged to a multi-decade high. Stock investors will likely be able to continue looking past even lasting price increases, some economists said. 

"We don't expect higher inflation to derail U.S. equities," Capital Economics markets economist Franziska Palmas wrote in a note Friday morning. "While we think that inflation in the U.S. will prove more persistent than both the Fed and investors appear to anticipate, we still expect the S&P 500 to make some further gains over the next couple of years." 

"Two factors explain this in our view. First, signs of rising inflation have not sparked a reassessment of the outlook for monetary policy," Palmas said. "This is largely because the Fed has stressed that it thinks this increase in inflation will be transitory and that it therefore won’t act on it. Investors seem to believe this."

"Second, rising prices and shortages haven’t raised significant concerns about the economic recovery among investors so far," she added. "S&P 500 earnings forecasts for the next few years have continued to be revised up."

7:25 a.m. ET Friday: S&P 500 looks to add to record levels 

Here's where markets were trading Friday morning:

  • S&P 500 futures (ES=F): 4,244.75, +6.75 points (+0.16%)

  • Dow futures (YM=F): 34,540.0, +79 points (+0.23%)

  • Nasdaq futures (NQ=F): 13,988.50, +28.75 points (+0.21%)

  • Crude (CL=F): +$0.35 (+0.50%) to $70.64 a barrel

  • Gold (GC=F): -$5.90 (-0.31%) to $1,890.50 per ounce

  • 10-year Treasury (^TNX): -1.2 bps to yield 1.447%

7:52 p.m. ET Thursday: Stock futures trade near the flat line

Here's where markets were trading Thursday evening: 

  • S&P 500 futures (ES=F): 4,238.75, +0.75 points (+0.02%)

  • Dow futures (YM=F): 34,459.00, -2 points (-0.01%)

  • Nasdaq futures (NQ=F): 13,968.25, +8.5 points (+0.06%)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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