US stocks rose on Friday, erasing some of the losses incurred earlier this week after concerns about persistent inflation and the resilience of the US economy increased volatility in recent sessions.
The S&P 500 is up more than 1.5% on the day Friday while the Nasdaq is up nearly 3%. Dow added more than 350 points. The sharp upward move came after Federal Reserve Chairman Jerome Powell asserted in an interview with Marketplace Public Radio on Thursday that two additional 50 basis point interest rate increases were on the table at the Fed’s next two meetings, and that officials were not “actively considering” more. Aggressiveness increased 75 basis points. His comments echoed what other Fed officials said this week as well.
Just a day ago, the S&P500 closed within walking distance of a bear market, which is usually defined as a close of at least 20% from a recent record high. The index is down just over 18% from its Jan. 3 high through Thursday’s close, and is headed for a weekly decline of 4.7% if levels hold through the end of Friday’s session.
The Dow Jones Industrial Average and Nasdaq Composite also headed for weekly losses of 3.6% and 6.4%, respectively, based on Thursday’s closing prices. Treasury yields rose and then pared gains again this week, with the 10-year Treasury yield hovering around 2.9% on Friday morning. Bitcoin prices rebounded to trade above $30,000 after hitting its lowest level since December 2020, as the Luna price crash reverberated in the broader cryptocurrency market.
This week’s market volatility coincided with two major inflation reports that came in higher than expected. Thursday’s Producer Price Index showed an 11% year-over-year rise in wholesale prices last month, with that rate moderating only slightly from a March high of 11.5%. The Consumer Price Index released earlier this week showed a still-high 8.3% annual increase in the prices consumers paid last month.
“Inflation has certainly become not only an objective but also a real issue for the broader market, as the Federal Reserve has also increased its forecast for a number of [interest rate] Sonali Pier, managing director and portfolio manager at Pimco, told Yahoo Finance Live on Thursday: “In terms of the impact of inflation, it’s really at this point, we’ll see if the Fed raises interest rates, breaks up some of the balance sheet, it can remove some of the… Inflation foam. Because it’s so high, it’s starting to affect companies — from their ability to move forward from a pricing power perspective, as well as consumers, whether it’s at the gas pump or as a result of food escalation and the like.”
Other strategists agreed that the Fed’s response to inflation – and how well the economy holds up as the Fed tightens financial conditions to tackle inflation – will be the key factor to watch going forward in the markets.
“We’re in an environment right now where inflation is high. The labor market is very tight. The Fed wants to bring down inflation. They want to sort of calm the overheating in the labor market, which means their bias is fiscal tightening,” said Jason Draho, head of asset allocation at UBS on Thursday said conditions and tried and slowed down growth.” “In this environment, it wouldn’t be great for any type of financial asset.”
“[Once] We got a kind of real cessation of inflation so that people become more comfortable than it is moderate and moderate [to] A sustainable level the Fed could be more comfortable, and they don’t have to raise it more aggressively… I think that’s the main catalyst,” Draho said. Unfortunately, it may be a few months before the data begins to clearly show that inflation is definitely below its peak, and the Fed can meet its target in two years.”
“So I think at the moment, it’s definitely a volatile market,” he added.
10:15 a.m. ET: Consumer confidence drops to lowest level since 2011: University of Michigan
Consumer confidence fell to its lowest level in more than a decade in early May, according to the University of Michigan, as inflation concerns persisted.
The closely watched University of Michigan consumer survey index fell to 59.1 in May’s preliminary report, sharply down from April’s reading of 65.2. The latest reading hit its lowest level since 2011.
The drop in sentiment was “widespread — relative to current economic conditions as well as consumer expectations, and was evident across income, age, education, geography and political affiliation — a continuation of the general trend toward a general decline in sentiment over the past year,” Joan Hsu, director of Consumer Surveys, said in a statement. Journalist. Consumers’ assessment of their current financial situation compared to last year is at its lowest reading since 2013, with 36% of consumers attributing their negative assessment to inflation.
Consumer inflation expectations remained elevated in May, with the survey showing one-year inflation expectations unchanged at 5.4%. However, some strategists have suggested that the decline in risky assets over the past several weeks has played a larger role in the decline in the main index.
“I would argue that the drop was largely a result of lower stock prices. We know U Mitch is more sensitive to markets,” Neil Dutta, head of economics at Renaissance Macro Research, wrote in an email Friday morning. “Inflation is a certain issue but the chain of inflation expectations has not changed.”
9:33 a.m. ET: Stocks open higher
Here are the major moves in the markets as of 9:33 AM ET:
Standard & Poor’s 500 (^ Salafist Group for Preaching and Combat): +43.33 (+10%) to 3973.41
dow (^ DJI): +241.55 (+0.76%) to 31971.85
Nasdaq (^ ninth): +189.64 (+1.67%) to 11560.61
raw (CL = F.): + 3.05 dollars (+ 2.87%) to 109.18 dollars per barrel
He went (GC = F.): – $24.60 (-1.35%) to $1,800.00 per ounce
Treasury for 10 years (^ degeneration): +9.8 basis points to produce 2.9150%
7:54 a.m. ET: Tesla shares jump in early trading after Musk says Twitter deal is paused
Tesla (TSLA) shares jumped more than 6% before the opening bell Friday morning after CEO Elon Musk said his $44 billion plan to buy Twitter (TWTR) had been paused, pending more details about how much Twitter’s usage base includes On Android accounts.
“Twitter deal is temporarily on hold pending account backing up details that spam/fake accounts already account for less than 5% of users,” Musk He said in a Twitter post early Friday. He linked it to a Reuters story that said filings on Twitter showed that fake or spam accounts make up less than 5% of the company’s monetized daily active users.
When announcing his deal to buy Twitter over the past month, Musk suggested targeting bot accounts and authenticating users was one of his priorities for the post-deal company.
Twitter shares sank 11% in early trading to hover around $40 per share.
7:45AM ET Friday: A jump in stock futures after Powell reconfirmed a 75 basis point interest rate hike not currently under discussion
Here is where the markets were trading before the opening bell on Friday morning:
S&P 500 futures contracts (ES = F.): +46 points (+17%) to 3,973.25
Dow futures contractsYM = F.): +262.00 points (+0.83%) to 31914.00
Nasdaq futures contractsNQ = F.): +206.75 points (+1.73%) to 12154.00
raw (CL = F.): +1.79 dollars (+1.69%) to 107.92 dollars per barrel
He went (GC = F.): – $7.90 (-0.43%) to $1816.70 per ounce
Treasury for 10 years (^ degeneration): +9.8 basis points to produce 2.915%
6:10pm ET Thursday: Stocks open lower
Here’s where the markets are trading Thursday night:
S&P 500 futures contracts (ES = F.): -10 points (-0.25%) to 3,917.25
Dow futures contractsYM = F.): -73 points (-0.23%) to 31,579.00
Nasdaq futures contractsNQ = F.): -41 points (-0.34%) to 11906.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.
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