U.S. stocks recovered this week from a slump that brought the market down for three weeks in a row after recent comments from Federal Reserve officials boosted sentiment and inflation expectations eased.
The S&P 500 rose more than 3% on Friday, the most since May 2020. It closed the week up 6.5%, marking its best week in nearly a month. The government stock rally declined on Friday, but the politically sensitive US two-year yield is still recording its biggest weekly decline since mid-May.
As traders struggled with data flows this week, sentiment improved on Friday after the University of Michigan’s assessment of long-term expectations for consumer inflation returned from its initially reported 14-year high, potentially reducing the urgency of steeper increases. interest. Investors were also reassured by the Fed’s president in St. Louis, James Bullard, who said worries about the US recession were exaggerated. Fed Chairman Jerome Powell reaffirmed his determination to cool inflation in a statement to lawmakers this week, but some traders found solace in his comments as a signal that the central bank would consider the likelihood of a recession as it moves to curb inflation.
“We are now seeing a few days of positive market performance and this is indicative of a very short-term bear rally,” said Silvia Jablonski, CEO of Defiance ETFs, by telephone. “The fact that we passed the Fed meeting and all kinds of Fed testimonies, with the exception of additional bad news, could continue for the next few days.
The winning season will signal whether the rally continues, she said.
Others are still waiting to see how bond markets react to the Fed’s latest comments and economic data.
“The volatility of the fixed income market is even higher than that of the stock market when you move against VIX,” said John Flahyve, head of fixed income investment at BNY Mellon Wealth Management. “This is really at the root of all the uncertainty in all capital markets, and one of our catalysts needed to calm the stock market in order to gain a foothold would really be for the bond markets to calm down.
Elsewhere, bitcoin has risen to about $ 21,000. The dollar fell. West Texas Intermediate oil rose after retreating in the previous two sessions. Sliding commodity prices have helped reduce market expectations of inflation expectations.
“The Fed seems to have succeeded, at least temporarily, in its mission to cool an overheated economy,” Lewis Grant, a senior portfolio manager at Federated Hermes, wrote in a note to clients. “Commodity prices have fallen from their highest levels as fears of a recession are rising.
New home sales in the United States jumped in May, reflecting profits in the West and South and breaking a month-long decline as the residential market adjusts to rising borrowing costs and still-rising prices. The increase in sales may reflect some buyers who block their mortgage interest rates in anticipation of even higher borrowing costs.
Some of the main market movements:
Stocks
- The S&P 500 rose 3.1% at 4 p.m. New York
- The Nasdaq 100 rose 3.5%.
- The Dow Jones Industrial Average rose 2.7%.
- The MSCI World Index rose 0.4%.
Currencies
- The Bloomberg Dollar spot index fell 0.3%.
- The euro rose 0.3% to $ 1.0556
- The British pound rose 0.2% to $ 1.2284
- The Japanese yen fell 0.2% to 135.21 per dollar
Bonds
- The yield on 10-year bonds increased by five basis points to 3.13%
- Germany’s 10-year yield rose one basis point to 1.44%.
- Britain’s 10-year yield fell one basis point to 2.30%
Goods
- West Texas Intermediate crude rose 2.9 percent to $ 107.34 a barrel
- Gold futures fell 0.1% to $ 1,827.20 an ounce
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