All three major U.S. stock benchmarks closed sharply higher Friday, with the technology-heavy Nasdaq Composite surging more than 3%, as investors reassessed the expected path of Federal Reserve interest-rate hikes. The Dow Jones Industrial Average, S&P 500 and Nasdaq each scored weekly gains, snapping three straight weeks of losses.
- The Dow Jones Industrial Average DJIA, +2.68% gained 823.32 points, or 2.7%, to close at 31,500.68, its largest daily percentage gain since May 4.
- The S&P 500 SPX jumped 116.01 points, or 3.1%, to finish at 3,911.74, its biggest daily percentage gain since May 18, 2020.
- The Nasdaq Composite COMP, 3.34% surged 375.43 points, or 3.3%, to end at 11,607.62, its largest daily percentage gain since May 13.
For the week, the Dow booked a 5.4% gain, while the S&P 500 climbed 6.5% and the Nasdaq jumped 7.5%, according to Dow Jones Market Data. The Dow and S&P 500 each saw their biggest weekly gain since late May, while the Nasdaq had its best week since March.
The market now seems to be interpreting recent signs of slowing growth as a reason for the Federal Reserve to potentially have “a lighter touch” in its battle with inflation, said Dave Grecsek, managing director for investment strategy and research at Aspiriant, in a phone interview Friday. The thinking seems to be that maybe “we really can avoid a recession,” he said, with the Fed potentially needing to become less aggressive in hiking rates to bring down inflation as the economy slows. Commodity prices have been falling recently, and judging by Fed funds futures, investors now see a lower peak in the path of the Fed’s benchmark interest-rate target. “We’ve seen a two-week drop in commodity prices and now we are seeing Fed funds futures pricing in rate cuts out in 2023. The thing holding back the market was endless rate hikes, if we’ve found the terminal rate then stocks can make headway here,” said Mike Antonelli, a market strategist at Baird. “Hopes that inflation is peaking and that the economy is still on solid footing has some investors confidently buying up heavily discounted stocks,” said Edward Moya, senior market analyst for the Americas at OANDA, in an emailed note Friday.San Francisco Fed President Mary Daly on Friday joined others in signaling support for another big rate increase in July to slow inflation. Some market strategists also attributed the bounce in stocks this week to technical factors after the main benchmarks tumbled last week. Meanwhile, the rebalancing of the Russell U.S. equity indexes after the market’s close Friday resulting in a surge of trading volume and price upwards as we headed toward the closing bell.
Don’t trust the stock-market bounce until S&P 500 is back above 3,800
The market is being driven by “this push and pull between inflation risk, recession risk and the Fed’s ability to navigate a path forward in terms of rate policy,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors, in a phone interview Friday. Investors are trying to work out “how quickly and how far” the Fed will need to go — or will “be able to go” — in terms of further tightening amid evidence the U.S. economy is slowing, he said. NN: the POP in the stock markets were little more then a dead cat balance. In part driven by the old Wall Street trick, throw the losers and add the current crop of winners. This time it was the Russel 2000 “rebalancing”. For the record we shorted into the close…….