Stocks rose on Friday as traders digested a fresh batch of bank earnings and strong economic data that eased some fears that the Federal Reserve could hike by 100 basis points to curb rising inflation.
Dow Jones industrial index grew by 550 points, or by 1.8%. The S&P 500 jumped 1.57% and the Nasdaq Composite added 1.33%, but stocks remained on track for weekly losses.
“The market is getting a little more confident that the Fed is not likely to deliver a full rate hike at the end of the month and that we are getting closer to seeing a peak in Fed tightening that will be priced in by the market,” said Edward Moya, senior analyst at OANDA. This “provides some relief for investors to return to the stock.”
A new round of banking results Wells Fargo and Citigroup offered further insight into the state of the economy. Wells Fargo increased by 6.4%, even as quarterly profit fell by 48% and the bank set aside funds for bad loans. Citigroup up 11.2% as it beat estimates and benefited from the rate hike.
A day earlier, investors read worrisome reports from JPMorgan Chase and Morgan Stanley that sparked big bank gains, and weighed the possibility of more interest rate hikes by the Federal Reserve and worries about the threat of a recession.
That, combined with strong preliminary data on consumer sentiment and retail sales for June, appeared to calm fears that the Fed would hike by 100 basis points at its upcoming policy meetings. It also showed that there are consumers increasing retail spending even as inflation reaches record highs.
The numbers are a sign of relief for the stock, helping reduce the likelihood of a sharper rally. However, a 75 basis point increase is still expected in July, said Cathy Bostiancic of Oxford Economics.
“The market appears to be welcoming the news, although retail strength may only add fuel to the Fed’s fire to continue its rate hike campaign to cool the economy and tame inflation,” said Mike Lowengart, managing director of investment strategy at Morgan Stanley E- Trade Capital Management, noting that the figures are not adjusted for inflation.
Friday’s results motivated a broad rally in the S&P 500. All major sectors moved higher on the day. Financial indicators jumped by more than 3%, thanks to the growth of bank shares. Health care jumped 2% as UnitedHealth rose 5.1% amid strong quarterly results.
Battered tech stocks also bounced on Friday. Meta Platforms, Salesforce and Amazon rose 3%, while Netflix jumped 5.4%. Goldman Sachs, UnitedHealth and JPMorgan Chase led the Dow’s recovery, rising more than 4% each.
For the week, the Dow fell 0.5%, while the S&P and Nasdaq fell 1.32% and 2.09%, respectively.
In corporate news, Pinterest shares rose 14.7% after the Wall Street Journal reported that activist investor Elliott Management had acquired a more than 9% stake in the social media company.
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