U.S. stocks ended sharply higher on Friday to record their first weekly advance since May as investors deliberated if markets have hit their lows and reassessed Fed’s aggressive rate hike plans. The rebound rally was led by tech stocks. All the major indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) jumped 2.7% or 823.32 points to finish at 31,500.68 points.
The S&P 500 rose 3.1% or 116.01 points to close at 3,911.74 points. Consumer discretionary, materials, communication services and tech stocks were the best performers.
The Materials Select Sector SPDR (XLB) gained 4%, while the Consumer Discretionary Select Sector SPDR (XLY) and the Communication Services Select Sector SPDR (XLC) added 3.8% each. The Technology Select Sector SPDR (XLK) gained 3.6%. All the 11 sectors of the benchmark index ended in positive territory.
The tech-heavy Nasdaq climbed 3.3% or 375.43.16 points to end at 11,607.62 points.
The fear-gauge CBOE Volatility Index (VIX) was down 6.27% to 27.42. Advancers outnumbered decliners on the NYSE by a 4.66-to-1 ratio. On Nasdaq, a 2.15-to-1 ratio favored advancing issues. A total of 19 billion shares were traded on Friday, higher than the last 20-session average of 12.9 billion.
Positive Sentiments Send Stocks on a Rally
Investors have been worrying about slowing economic growth as the Fed has continued to hike interest rates aggressively in its battle to check soaring inflation. This has been taking a toll on stocks. However, investors’ sentiments finally seem to have got a lift over the past few sessions, which saw all the three major indexes record weekly gains for the first time after three weeks.
The bear market rally continued for the third consecutive session on Friday. Commodity prices have finally started falling and going by the Fed’s fund futures, investors are now expecting lower rate hikes over the course of time in the Fed’s benchmark interest-rate target.
Investors now expect rate hikes to hit a high of something between 3.25% to 3.5% by December, which is lower than the 3.5% to 3.75%, which was being expected until a week ago, according to CME’s FedWatch tool.
Also, investor sentiment got a boost after a reading of the consumer sentiment, which is followed closely by the Fed, showed that people now expect inflation to ease slightly. This has been giving a boost to investor confidence lately.
Tech, Financial Stocks Drive Rally
The upbeat mood has been helping markets over the past three days. Friday wasn’t any different. Friday’s rally was led by the beaten-down tech stocks. Shares of Meta Platforms, Inc. META soared 7.2%, while Apple Inc. AAPL gained 2.5%. Apple has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Other notable gainers from Friday’s rally were financial, materials and consumer discretionary stocks. Shares of The Goldman Sachs Group, Inc. GS jumped 5.8%, while Wells Fargo & Company WFC rallied 7.6%.
The gains in S&P 500 were led by cruise line stocks. Shares of Royal Caribbean Cruises Ltd. RCL surged 15.8%. Carnival Corporation & plc’s CCL shares gained 12.4%.
In economic data released on Friday, the University of Michigan’s final reading of consumer sentiment reflected a massive decline. Consumer sentiment hit a record low of 50 in June. Although the reading isn’t impressive, a reading in the detailed report showed that consumers’ 12-month inflation expectations eased to 5.3%, which is being seen as a positive.
In other economic data, the Census Bureau said that new home sales in the United States increased 10.7% in May to 696,000 units from April’s decline of 12%.
All the three major indexes finally managed to snap a three-week losing streak in the holiday-shortened week. The Dow finished 5.4% higher for the week.
The S&P 500 ended 6.5% up for the week. The index had entered a bear market last week after recording its worst week since March 2020. The Nasdaq was the best performer for the week, finishing 7.5% up.
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