US stocks on Friday closed sharply higher, ending several days of sell-offs with a rebound fueled by upbeat earnings, strong economic data and easing fears of a larger-than-expected interest rate hike by the US Federal Reserve.
All three major US stock indices posted solid gains, with financials leading the charge in the wake of Citigroup Inc’s earnings beat. This reversed Thursday’s sell-off driven by downbeat guidance from rivals JPMorgan Chase & Co and Morgan Stanley.
The S&P 500 and the Dow snapped five-day losing streaks, but all three indices ended below last Friday’s close.
“We’re still below the downward sloping trend line,” said Sam Stovall, chief investment strategist at CFRA Research in New York. “One day does not a new trend make.”
Consumer prices last month posted the highest annual growth rate since 1981, raising chances that the Fed could increase its key fed funds target rate by 100 basis points, steeper than the 75 basis-point hike previously expected.
Investors “would be unnerved by a 100 basis-point rate hike, as it would imply that the Fed does not know what it is doing and is being controlled by the data,” Stovall said.
Photo: AFP
Those fears were calmed by remarks from Fed officials on Thursday and Friday, indicating that an interest rate increase of 75 basis points is likely in the cards.
Economic data released on Friday surprised to the upside, with better-than-expected retail sales, an uptick in consumer sentiment, lower inflation expectations and cooling import prices.
“Economic indicators are not consistent right now,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. “They are positive and negative, which shows we’re in a period of transition.”
The Dow Jones Industrial Average rose 658.09 points, or 2.15 percent, to 31,288.26, the S&P 500 gained 72.78 points, or 1.92 percent, to 3,863.16 and the NASDAQ Composite increased 201.24 points, or 1.79 percent, to 11,452.42.
For the week, the Dow shrank 0.16 percent, the S&P 500 dipped 0.93 percent and the NASDAQ declined 1.57 percent.
The S&P 500’s 11 major sectors ended Friday’s session higher, with financial stocks nabbing the largest percentage gain of 3.5 percent.
The second-quarter earnings season is well under way, with 35 of the companies in the S&P 500 having reported. Of those, 80 percent have beaten Wall Street expectations, Refinitiv has said.
Analysts now expect aggregate year-on-year S&P 500 second-quarter profit growth of 5.6 percent, down from the 6.8 percent estimate at the beginning of the quarter.
Citigroup bucked the trend among big bank earnings reports as its quarterly profit beat expectations, sending the stock up 13.2 percent.
Wells Fargo & Co said its quarterly profit nearly halved due to increased loan loss provisions and a weak mortgage business, but its shares still gained 6.2 percent.
The S&P Banking index jumped 5.8 percent, its biggest one-day percentage surge since January 2020.
Advancing issues outnumbered decliners by a 4.53-to-1 ratio on the NYSE; on the NASDAQ, a 2.36-to-1 ratio favored advancers.
The S&P 500 posted one new 52-week high and 31 new lows, while the NASDAQ Composite recorded 37 new highs and 126 new lows.
Volume on US exchanges was 10.26 billion shares, compared with the 12.31 billion average over the past 20 trading days.
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