Stocks rallied on Friday in response to a fresh round of bank earnings and promising economic data, as fears of a 100-basis-point Federal Reserve hike to control rising inflation eased.
The Dow Jones Industrial Average rose 658.09 points, or 2.15%, to 31,288.26. The S&P 500 jumped 1.92% to 3,863.16, and the Nasdaq Composite rebounded 1.79% to 11,452.42.
Despite Friday’s rally, all major averages ended the week with losses. The Dow fell nearly 0.2 percent, while the S&P and Nasdaq fell 0.9 percent and nearly 1.6 percent, respectively. The session’s moves left the S&P 500 about 19% off its highs.
“The market is becoming a little more convinced that the Fed is not likely to deliver a full point rate hike at the end of the month and that we are close to seeing the Fed’s maximum tightening coming into the market.” said Edward Moya, senior analyst at OANDA. This “is providing some relief for investors to climb back into stocks.”
A new round of bank results from Wells Fargo and Citigroup offered a more detailed look at the state of the economy. Wells Fargo exited around 6.2%, even as quarterly profit fell 48% and the bank set aside funds for bad loans. Citigroup rose 13.2% as it beat estimates and benefited from a rising rate environment.
A day earlier, investors reviewed troubling reports from JPMorgan Chase and Morgan Stanley, which kicked off major bank earnings. Investors also weighed the likelihood of bigger interest rate hikes from the Federal Reserve and recession worries.
Along with new bank earnings, traders digested strong preliminary consumer sentiment data and retail sales that beat expectations. The numbers appeared to calm concerns that the Fed will hike by 100 basis points at upcoming policy meetings and indicated that consumers are increasing retail spending even as inflation hits record highs.
Meanwhile, comments from Atlanta Fed President Raphael Bostic on Friday indicated he would likely not support a potential higher rate move. He warned that rapidly increasing rates could “undermine a lot of these things that work well.”
“The market appears to be welcoming the news, although retail strength could only add fuel to the Fed’s fire to continue its rate hike campaign to cool the economy and control inflation,” said Mike Loewengart, managing director of investment strategy at Morgan Stanley’s E-Trade Capital Management, noting that the numbers are not adjusted for inflation.
Friday’s results prompted a broad rally in the S&P 500, with all major sectors ending the session in positive territory. Financials rose 3.5% led by a rise in bank stocks, while the health sector rallied about 2.5% after strong earnings results from UnitedHealth. Consumer staples marked the only sector to close the week slightly higher.
Battered tech stocks also jumped on Friday. Meta Platforms, Salesforce and Amazon gained 4.2%, 3.9% and 2.6%, respectively. Netflix rose 8.2%. UnitedHealth, JPMorgan Chase and American Express led the Dow’s recovery, rising about 5.4%, 4.6% and 4.4%, respectively.
In other news, Pinterest shares jumped nearly 16.2% after a Wall Street Journal report said activist investor Elliott Management took a stake of more than 9% in the social media company .
Read today’s market coverage in Spanish here.