US stocks opened higher on Friday, with major indexes on track to extend the recent gain period and break a series of heavy losses.
The S&P 500 rose 0.8% shortly after its launch. The Dow Jones Industrial Average added 48 points, or 0.1%, and the Nasdaq Composite rose 1.4%. Shares rose on Thursday, pushing the Dow to its fifth consecutive daily gain.
All three major indexes headed for Friday’s session with solid gains for the week, a sharp reversal from a period of weekly losses. Last week, the Dow fell for the eighth week in a row, its longest since 1932, while the S&P 500 and Nasdaq Composite lost seven weeks. This week, however, all three indices rose 3.4 percent or more based on Thursday’s close. The Dow was up for the week, up 4.4 percent on its way to its first increase since March.
Few investors and strategists are willing to ask for a bottom of the sell-off, which led to a 15% drop in the S&P 500 benchmark for the year. However, many said this week’s gains offered a respite from what appears to be an almost continuous breakdown of wallets. Many cited strong profits this week as a cause for optimism, with stores such as Macy’s and Dollar Tree reporting strong sales growth. The deep sell-off of some stocks made valuations more attractive, encouraging some investors to come in and buy a decline.
On Friday, investors found good news in a new round of data, which showed that Americans increased spending by 0.9% in April compared to the previous month, exceeding expectations. Meanwhile, carefully monitored inflation reporting in the United States declined in April. Shares rose before the market after the publication of the figures.
However, few of the main factors that led to the decline in shares this year have changed. The Federal Reserve is still looking to continue to raise interest rates aggressively this year to fight rising inflation, raising fears that action will eventually lead the US economy into recession. Meanwhile, the blockade of Covid-19 in China and the war in Ukraine have exacerbated supply chain problems. For weeks, investors have also been absorbing disappointing earnings results and data that add to the gloomier picture of the economy.
The recent stock market performance has led people to talk about a possible recession in the United States. So what are the leading economic indicators that have been solid indicators of recession and what can you do to prepare for a recession? Dion Rabin from WSJ explains. Illustration: David Fang
“We are still of the opinion that we see nothing but a short-term rally,” said Florian Yelpo, macro manager at Lombard Odier Investment Managers, noting that the company’s leading multi-asset portfolio holds about 60% in cash.
However, he noted that the recent bearish position among professional and individual investors suggests that the current recovery may continue, as sentiment is often seen as the opposite indicator.
Nearly 54 percent of individual investors expect stocks to fall over the next six months, according to a survey by the American Individual Investors Association for the week to Wednesday, slightly higher than the previous week. Meanwhile, a May study by BoA Global Research found that cash levels among global fund managers had risen to their highest levels since the September 11, 2001 attacks in the United States.
Despite doubts about the long-term sustainability of the rally this week, many investors say some stocks and sectors have become more attractive as ratings have fallen. Nearly $ 21 billion went into global equity funds in the week to Wednesday, according to an analysis by BofA Global Research on EPFR data, the largest inflow in 10 weeks.
Siema Shah, chief strategist at Principal Global Investors, said her company has found opportunities to buy in small-cap stocks, consumer goods and profitable technology companies, which continue to see value and use increase.
“It is very important at this stage for investors to return to the market and look at the strength of a company before dipping their feet again,” Ms Shah said. “As we approach an economic downturn, we would expect some companies – those with a lot of leverage and not as strong balance sheets or stable earnings prospects – to come under significant pressure.
Shares of Dell Technologies jumped 15% after earnings rose and some operating expenses fell. Ulta Beauty rose 10.2% after the retailer raised its year-round sales and profit guidelines after better-than-expected results for the first quarter.
Shares of Gap fell 13% after the retailer turned to a loss amid a decline in net sales. Shares of cloud human resources software company Workday fell 7.2% after adjusted earnings for the first quarter, which did not meet expectations.
In the bond market on Friday, the yield on the 10-year reference bonds of US government securities fell to 2.739%, from 2.766% on Thursday. Profitability and prices are moving in opposite directions.
Oil prices fell as crude Brent, the international benchmark, fell 0.2 percent to $ 113.94 a barrel.
The dollar lost ground again. The WSJ, which measures greenbacks against a basket of 16 currencies, fell 0.1%, extending the recent period of losses amid fears that the dollar has become more expensive against its main indicators. The Russian ruble fell 1.1 percent against the dollar, also extending its decline by another day after the country’s central bank cut interest rates.
Wall Street stock indexes rose on Thursday.
Photo: David L. Nemek / Associated Press
Abroad, the pan-continental Stoxx Europe 600 added 1%. In Asia, Hong Kong’s Hang Seng rose 2.9 percent, driven by shares of Alibaba, which jumped 12 percent after posting gains that exceeded analysts’ expectations. Japan’s Nikkei 225 added 0.7%. Shanghai Composite rose 0.2%.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com
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