US stocks gained on Friday, shaking off some losses from earlier this week after concerns about lingering inflation and the resilience of the US economy sparked fresh volatility in recent sessions.
The S&P 500 rose more than 1.5% intraday on Friday while the Nasdaq jumped nearly 3%. The Dow added over 350 points. The sharp rise came after Federal Reserve Chairman Jerome Powell reaffirmed in an interview with public radio Marketplace on Thursday that two more 50 basis point rate hikes were on the table for the next two meetings of the Federal Reserve. Fed, and that officials were not “actively” considering a more aggressive 75 basis point hike. His comments echoed what other Fed officials also said this week.
Just a day earlier, the S&P 500 had closed within striking distance of a bear market, generally defined as a close of at least 20% from a recent high. The index is down just over 18% from its Jan. 3 high through Thursday’s close, and it has advanced to a weekly decline of 4.7% if levels hold until the end. of Friday’s session.
The Dow Jones Industrial Average and Nasdaq Composite also each headed for weekly losses of 3.6% and 6.4%, respectively, based on Thursday’s closing prices. Treasury yields soared and then pared their gains this week, with the benchmark 10-year Treasury yield hovering around 2.9% on Friday morning. Bitcoin prices rallied to trade above $30,000 after hitting the lowest level since December 2020 as a Luna price crater further rippled through the broader Bitcoin market. cryptocurrency.
Market swings this week coincided with two major inflation reports that were hotter than expected. Thursday’s Producer Price Index showed an 11% year-on-year increase in wholesale prices last month, easing only slightly from the record high of 11.5 % Of March. And the Consumer Price Index released earlier this week showed a still high 8.3% annual increase in prices paid by consumers last month.
“Inflation has certainly become not just a topical issue, but a real issue for the broader market, as the Fed has also raised its forecast for the number of [interest rate] hikes needed,” Sonali Pier, managing director and portfolio manager at Pimco, told Yahoo Finance Live on Thursday. rates, unfolds part of the balance sheet, can take away some of that inflation foam. Because it’s quite high, and it’s starting to have an impact on businesses – from the point of view of their ability to get things done from a pricing power point of view, as well as consumers, that either at the gas pump or as a result of food increases, etc.
Other strategists agreed that the Fed’s response to inflation — and the resilience of the economy as the Fed tightens financial conditions to fight inflation — will be the key factor for markets to watch.
“We’re in a high inflation environment right now. The labor market is very tight. The Fed wants to bring inflation down. They kind of want to cool the overheated labor market, which means their party taken is to tighten conditions and try to slow growth,” Jason Draho, head of asset allocation at UBS, said Thursday. “In this environment, it’s not good for any type of financial asset.”
“[Once] we’re getting kind of a real break on inflation that people are getting a lot more comfortable with it moderating, and moderating [to] a sustainable level that the Fed might be more comfortable with, and they don’t have to increase more aggressively… I think that’s the key catalyst,” Draho said. “Unfortunately, it could take a few more months before the data starts to clearly show that inflation is well below its peak, and the Fed could hit its target in two years.”
“So I think right now it’s definitely a choppy market,” he added.
10:15 a.m. ET: Consumer sentiment drops to lowest level since 2011: University of Michigan
Consumer confidence fell to its lowest level in more than a decade in early May, according to the University of Michigan, as inflation concerns persisted.
The closely watched University of Michigan Consumer Surveys Index fell to 59.1 in May’s preliminary report, down sharply from April’s reading of 65.2. The latest reading marked the lowest since 2011.
The decline in sentiment “was broad-based – for current economic conditions as well as consumer expectations, and visible across income, age, education, geography and political affiliation – continuing the overall downward trend. sentiment over the past year,” Joanne Hsu, director of consumer surveys, said in a press release. “Consumers’ assessment of their current financial situation compared to a year ago is at its lowest level since 2013, with 36% of consumers attributing their negative assessment to inflation.”
Consumer inflation expectations remained elevated in May, with the survey showing one-year inflation expectations unchanged at 5.4%. However, some strategists have suggested that the drop in risk assets over the past few weeks has played an even bigger role in driving the overall index down.
“I would say the decline was largely a function of falling stock prices. We know that U. Mich is more market-sensitive,” wrote Neil Dutta, chief economics officer at Renaissance Macro Research, in an e-mail. email Friday morning. “Inflation is a problem of course, but the series of inflation expectations have remained unchanged.”
9:33 a.m. ET: Stocks open higher
Here are the top moves in the markets as of 9:33 a.m. ET:
S&P 500 (^GSPC): +43.33 (+1.10%) to 3,973.41
Dow (^ DJI): +241.55 (+0.76%) to 31,971.85
Nasdaq (^IXIC): +189.64 (+1.67%) to 11,560.61
Raw (CL=F): +$3.05 (+2.87%) at $109.18 per barrel
Gold (CG=F): -$24.60 (-1.35%) at $1,800.00 per ounce
10-year cash flow (^TNX): +9.8 bps for a yield of 2.9150%
7:54 a.m. ET: Tesla shares jump in early trading after Musk says Twitter deal is on hiatus
Shares of Tesla (TSLA) jumped more than 6% before the opening bell on Friday morning after CEO Elon Musk said his $44 billion plan to buy Twitter (TWTR) had been temporarily put on hold, in pending further details on the share of Twitter’s usage base including bot accounts.
“The Twitter agreement is temporarily suspended pending details supporting the calculation that spam/fake accounts actually represent less than 5% of users,” Musk said. said in a Twitter post early Friday. He linked to a Reuters story suggesting Twitter filings showed fake or spam accounts made up less than 5% of the company’s monetizable daily active users.
In announcing his deal to buy Twitter last month, Musk suggested targeting bot accounts and authenticating users was one of his priorities for the company after the deal.
Twitter shares fell 11% in early trading to hover around $40 apiece.
7:45 a.m. ET Friday: Stock futures jump after Powell reaffirms 75 basis point rate hikes not currently under discussion
Here is where the markets were trading before the opening bell on Friday morning:
S&P 500 Futures Contracts (ES=F): +46 points (+1.17%) to 3,973.25
Dow futures (JM=F): +262.00 points (+0.83%) to 31,914.00
Nasdaq futures contracts (NQ=F): +206.75 points (+1.73%) to 12,154.00
Raw (CL=F): +$1.79 (+1.69%) at $107.92 per barrel
Gold (CG=F): -$7.90 (-0.43%) at $1,816.70 per ounce
10-year cash flow (^TNX): +9.8 bps for a yield of 2.915%
6:10 p.m. ET Thursday: Stocks open lower
Here’s where the markets were trading on Thursday night:
S&P 500 Futures Contracts (ES=F): -10 points (-0.25%) to 3,917.25
Dow futures (JM=F): -73 points (-0.23%) to 31,579.00
Nasdaq futures contracts (NQ=F): -41 points (-0.34%) to 11,906.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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