A turbulent week on Wall Street dominated by fears of a weakening economy ended on Friday with a broad rally that gave the market its best day in two weeks.
The S&P 500 rose 1.9%. Despite the gains, the benchmark index closed with its first weekly loss in the last three weeks. The Dow Jones Industrial Average rose his 1% and the Nasdaq Composite closed his 2.7% higher.
Technology and telecom-services stocks underpinned much of the gains as investors welcomed a big quarterly surge in Netflix subscribers. It helped raise investor expectations that the pace of rate hikes might slow down as early as next month.
The major indices started the week in the red, largely due to fears that the economy could not avoid a scarring recession. Some reports on the economy were weaker than expected as the effects of last year’s rate hike by the US Federal Reserve (Fed) began to seep through the system.
Not so long ago, bad news about the economy was often good news for Wall Street. But bad news about the economy is becoming bad news for Wall Street, and the prospect of a deep recession is more concerning.
Further complicating matters is that several Fed officials have continued to pound the message throughout the week that further rate hikes are likely, to ensure that the country’s high inflation is actually crushed. It was to maintain that level for some time. Although inflation has started to slow, upward pressure continues from a still-strong US job market and other factors.
Many Wall Street investors, who had already predicted a mild or short-term recession earlier this week, were hoping that the Fed’s rate cut later this year would mean a market recovery. Poor economic data and central bank comments this week threaten such forecasts.
But on Friday, Fed President Christopher Waller said he would support a rate hike of only half a percentage point on Feb. 1 when the central bank announces its next rate policy update. Waller also said interest rates were already high enough to slow the economy. The remarks may have helped calm market fears of rising interest rates.
Quincy Crosby, chief equity strategist at LPL Financial, said: “It’s important to hear the members of the Federal Reserve Board supporting it.
Tech stocks were a big part of Friday’s S&P 500 rally. Google’s parent company said it was laying off 12,000 employees to cut costs, and Netflix reported a surge in subscriber numbers.
Jay Hatfield, CEO of Infrastructure Capital Advisors, said Thursday as the market feared the streaming service’s latest results would disappoint, fueling concerns about lower overall earnings. A late Netflix surprise report helped set the stage for Friday’s rally, he said.
“When they start to go up sharply, all the Nasdaqs start to move, which drives the S&P, and everything else follows,” Hatfield said.
Alphabet is up 5.3% after becoming a recent big tech, admitting it expanded too quickly in recent years amid the boom created by the pandemic.
Cruise lines also rose. Carnival was up 3.5% of him, Norwegian Cruise Line was up 4.5%, and Royal Caribbean was up 3.6% of him.
Also impacting the market on Friday was the expiry of $797 billion in stock option contracts. This is the largest single stock option amount since January 2022 and the fourth largest on record, according to Goldman Sachs.
U.S. Treasury yields nearly rose after recovering from early-week declines on fears of a weakening economy. Yields on 10-year government bonds, which help set rates on mortgages and other important loans, rose to 3.48% from 3.40% late Thursday.
The 2-year yield, which tends to track expectations of Federal Reserve (Fed) action more closely, rose to 4.19% from 4.13%.
Overall, the S&P 500 gained 73.76 points to 3,972.61. The Dow Jones Industrial Average was 330.93 points higher at 33,375.49. The Nasdaq added 288.17 points to close at 11,140.43.
Small business stocks also posted solid gains. The Russell 2000 Index rose 30.99 points (1.7%) to finish at 1867.34.
Overseas stock markets generally rose modestly.
The Nikkei 225 rose 0.6% after Japan reported consumer inflation reached 4% in December. This high figure could put pressure on the Bank of Japan to change its longstanding policy of keeping key rates at an ultra-low minus 0.1%. However, economists expect price pressures to ease in the coming months as inflation eases elsewhere.
Contributed by AP Business Writers Joe McDonald and Matt Ott.
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