U.S. stocks were bouncing Friday at the end of a volatile week, as investors assessed the scope for further downside as they weighed the Federal Reserve’s ability to get inflation under control without sending the economy into a tailspin.
How are stocks trading?
- The Dow Jones Industrial Average DJIA, +0.76% was up almost 373 points, or 1.2%, at about 32,103.
- The S&P 500 SPX, +1.68% rose about 86 points, or 2.2%, to 4,016.
- The Nasdaq Composite COMP, +3.03% advanced 410 points, or 3.6%, to 11,781.
On Thursday, the Dow industrials ended with a fall of 0.3%, about 500 points off the session’s low, but notching a sixth day of losses. The S&P 500 slipped 0.1%, while the Nasdaq Composite rose 0.1%.
For the week, the Dow is heading for a 2.2% decline, while the S&P 500 is on track to fall 2.5 and the Nasdaq is on pace to drop 2.8%, according to FactSet data, at last check.
What’s driving the markets?
The stock market’s bounce in trading Friday reflects the type of “sawtooth moves” seen when markets are looking for a bottom, according to Brendan Connaughton, founder and managing partner at Catalyst Private Wealth.
“The market has been beaten up,” Connaughton said by phone Friday. “This is the beginning of a bottoming process.”
Some analysts see stocks as due for at least a short-term bounce after recent losses, arguing that selling this week may have reached levels that signaled near-term capitulation. They cautioned, however, that a downtrend may still be firmly in place.
“As we have seen time and time again, stocks have struggled to sustain any recovery attempts as traders have been quick to take profit on rebounds amid a bearish macro back drop — rising interest rates, low growth and high inflation,” said Fawad Razaqzada, market analyst at City Index and Forex.com, in a note.
In an interview aired late Thursday on National Public Radio’s Marketplace program, Federal Reserve Chairman Jerome Powell warned that the central bank’s ability to tighten policy without sending the economy into a steep downturn wasn’t solely up to policy makers.
“So the question whether we can execute a soft landing or not, it may actually depend on factors that we don’t control,” Powell said.
Powell quibbled with the suggestion that last week he had taken the prospect of a 75 basis point rate rise off the table, emphasizing that he had said, “We weren’t actively considering that.”
But even if equities can manage a win on Friday, all three indexes are headed for weekly losses led by the Nasdaq. That would mark the battered tech index’s sixth straight weekly loss, while the Dow poised to fall for a seventh consecutive week.
The S&P 500, on track to decline for sixth straight week, is skirting bear market territory, defined as a drop of 20% from a recent peak. After Thursday’s close, the index was 18.1% off its Jan. 3 record high, according to Dow Jones Market Data.
Another weekly loss for the S&P 500 would mark the first time in over a decade that the index has seen six straight weeks of declines, pointed out a team of Deutsche Bank strategists led by Henry Hill.
“Unlike in April, when the equity declines were triggered by the prospect of a more aggressive Fed tightening cycle and went hand-in-hand with sovereign bond losses, this week’s declines have much more obviously surrounded global growth risks, which you can see in the way that Fed Funds futures are now beginning to take out some of the tightening they’d been pricing in over the year ahead,” said Hill.
The market has endured higher-than-forecast consumer prices this week, as well as continued high producer prices.
U.S. import prices cooled in April after a sharp gain over the previous three months, the Labor Department said Friday. Prices from overseas goods were unchanged after increasing 2.9% in March. Economists polled by The Wall Street Journal had expected a 0.6% gain in import prices in April.
The University of Michigan’s gauge of consumer sentiment fell to 59.1 in May from a final April reading of 65.2, its lowest level in more than 10 years. Economists were expecting a print of 64.1.
The drop takes the confidence gauge “deeper into recessionary territory. But confidence has been a poor guide to consumption growth in recent years, so we would not read too much into that signal,” said Michael Pearce, senior U.S. economist at Capital Economics, in a note.
Some recovery in battered cryptocurrency markets on Friday may also be helping sentiment overall, said analysts.
Bitcoin BTCUSD, +3.93% was up 4.9% at $29,976, staging a slight recovery from a roughly 16-month low hit Thursday of $25,400, amid a collapse of some stablecoins, which are supposed to be pegged to the dollar.
Which companies are in focus?
- Twitter Inc. TWTR shares were down 8.6% after Elon Musk tweeted that the deal to buy the social-media company was “temporarily on hold.” Musk, the chief executive of electric vehicle maker Tesla Inc. TSLA said the hold on the deal is “pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” In a subsequent tweet, Musk said he was “Still committed to the acquisition.” Tesla shares were up around 7%.
- Shares of Robinhood Markets Inc. HOOD were up almost 25% after a filing late Thursday revealed that Sam Bankman-Fried, the chief executive of cryptocurrency exchange FTX Trading, had taken a 7.6% stake in the popular trading platform.
How are other assets faring?
- The yield on the 10-year note TMUBMUSD10Y, 2.930% rose about 12 basis points to around 2.93%. Yields and debt prices move in opposite directions.
- Oil futures rose, with the U.S. benchmark CL.1, +3.96% up 4% at $110.38 a barrel. Gold futures GC00, -0.89% fell 0.8% to around $1,809 an ounce.
- In European equities, the Stoxx Europe 600 SXXP, +2.14% closed 2.1% higher Friday for a weekly gain of 0.8%. London’s FTSE 100 UK:UKX gained 2.6% Friday, advancing 0.4% for the week.
- In Asia, the Shanghai Composite CN:SHCOMP ended 1% higher, brining its weekly gain to 2.8%. The Hang Seng Index HK:HSI jumped 2.7% Friday and gained 0.5% for the week. Japan’s Nikkei 225 JP:NIK rose 2.6% Friday but still booked a weekly loss of 2.1%.
––Barbara Kollmeyer contributed to this report.