Dow soars more than 800 points and US stocks snap weekly losing streak as investors assess Fed's course of future rate hikes
- The S&P 500 spiked 3% Friday as US stocks surged and snapped a run of weekly declines.
- A drop in bond yields this week helped Wall Street's key indexes advance after three weeks of losses.
US stocks on Friday vaulted higher as investors considered the possibility that the Federal Reserve may be less aggressive in its path of rate hikes as economic data weaken.
Wall Street's three major benchmarks marked their first weekly increases after three weeks in the red. The Nasdaq Composite was the biggest gainer, at nearly 7%. Among individual stocks, FedEx rose after the package delivery company forecast an increase in full-year adjusted earnings.
The holiday-shortened week was rounded off by a downwardly revised consumer sentiment survey from the University of Michigan, to a record-low reading of 50.0. High inflation was a "paramount concern" among survey respondents. The survey did contain downwardly revised five- to 10-year inflation expectations, to 3.1% from 3.3%.
The June inflation expectations diminish the likelihood of another Fed rate hike of 75 basis points in July, Barclays said in a note Friday.
Here's where US indexes stood at 4:00 p.m. on Friday:
- S&P 500: 3,911.96, up 3.06%
- Dow Jones Industrial Average: 31,502.59, up 2.69% (825.23 points)
- Nasdaq Composite: 11,607.62, up 3.34%
Investors spent the week reading warnings about recession risks. Among them, Goldman Sachs said the risk of the US falling into a recession within a year has doubled following the Fed's rate-hike campaign and former NY Fed President Bill Dudley wrote a recession is "inevitable" within the next 12 to 18 months.
A decline in bond yields this week suggested investors appeared to be pricing in expectations that signs of slower economic growth will prompt the Fed to reduce the size and the speed of rate hikes.
St. Louis Fed President James Bullard said Friday during a UBS panel discussion in Zurich that the central bank should front-load interest rates hikes to bring down inflation sooner than later. He foresees the fed funds rate rising to 3.5% in 2022. The rate currently stands at a range of 1.5% to 1.75% after starting the year at 0% to 0.25%.
Oil prices were mixed. West Texas Intermediate crude gained 3% at $107.40 per barrel. Brent crude, the international benchmark, fell 0.3% to $108.81.
Gold edged up less than 0.1% to $1,829.90 per ounce. The 10-year yield rose 4 basis points to 3.13%.
Bitcoin moved up 1.1% to $21,030.85.