NEW YORK — Stocks rallied on Wall Street on Friday, pushing the S&P 500 up 3.1% for its best gain in two years. The benchmark index also ended the week up 6.4%, erasing the sharp loss suffered a week earlier. It was only the second winning week for the benchmark in the past 12 years. Stocks have risen this week as pressure from rising Treasury yields eased somewhat and investors believe the Federal Reserve may not have to be as aggressive about raising Treasury yields. interest than previously thought. he fights to control inflation. It was a respite after Wall Street fell for most of the year.
THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.
Stocks are rallying again on Friday, and Wall Street is heading into its second winning week in the past 12 to relieve some of its brutal selling this year.
The S&P 500 was up 2.4% in afternoon trading. That’s on pace with a 5.7% gain for the week, though it’s still close to 20% below its record fixed at the start of this year and has not recouped its loss from the previous week, which was the worst since the coronavirus crash in early 2020.
The Dow Jones Industrial Average rose 644 points, or 2.1%, to 31,321 as of 2:15 p.m. EST, and the Nasdaq composite rose 2.4%.
Stocks have risen this week as pressure from rising Treasury yields eases somewhat and investors speculate the Federal Reserve may not be so aggressive about raise interest rates as previously thought.
It’s a respite from Wall Street’s slide for most of the year, caused by the Fed and other central banks backtracking on the huge support provided to markets during the pandemic. Hoping to beat extremely high inflation, central banks raised interest rates and took other actions that hurt investment prices and threatened to slow the economy enough to trigger a recession. More such moves are sure to come.
Parts of the US economy are still bubbling, particularly the job market, but some discouraging signals have emerged recently. A report on Friday confirmed that consumer sentiment had fallen to its lowest level since the University of Michigan began keeping records, partly due to high inflation. Another weak spot this week suggested that the manufacturing and services sectors in the United States are not as strong as economists thought.
This weakened data raises concerns about the strength of the economy. But they can also be good for the financial markets, as paradoxical as that may seem.
They could mean less upward pressure on inflation, which would ultimately mean the Federal Reserve doesn’t have to hike rates as aggressively. And interest rates drive trade in everything from stocks to cryptocurrencies.
A nugget in the consumer sentiment report could carry particular weight for the markets. It showed consumer expectations for long-term inflation moderated to 3.1% from 3.3% mid-month. This is crucial for the Fed, as expectations of higher inflation in the future can trigger buying activity that further inflames inflation in a self-fulfilling vicious cycle.
Last week, the Fed raised its key short-term rate by the widest margin in decades and said another such hike could happen, although it is not common.
Over the past week, investors have slightly lowered their expectations of the Fed raising interest rates early next year.
That helped Treasury market yields pull back. The two-year Treasury yield, which tends to move with expectations for Fed actions, fell back to 3.07% from over 3.40% in the middle of last week.
The yield on the 10-year Treasury, which is the foundation of the global financial system, rose to 3.12% on Friday from 3.07% on Thursday evening. But it has also moderated after hitting 3.48% last week.
It started the year just above 1.50%.
A separate economic report released on Friday showed that new home sales unexpectedly accelerated last month. But the trend for housing has been largely down because it’s leading the Fed hikes.
More expensive mortgage rates are hurting the industry, and a separate report earlier this week showed that sales of previously occupied homes slowed last month.
Rising mortgage rates prompted LendingTree, the online marketplace that helps people find mortgages and other loans, to warn on Friday that it expects to post weaker revenue for the second quarter than previously expected. Its stock fell 9.2%.
The vast majority of Wall Street was heading in the opposite direction. More than 90% of S&P 500 stocks were up.
Cruise line Carnival was near the top of the pack, up 11.2%. It reported weaker results for its latest quarter than analysts expected, but it also said booking trends were improving.
FedEx rose 7% after giving a profit forecast for the coming fiscal year that beat some analysts’ expectations.
Other markets around the world also rallied on Friday.
London’s FTSE 100 gained 2.7%, Germany’s DAX gained 1.6% and France’s CAC 40 jumped 3.2%.
Tokyo’s Nikkei 225 gained 1.2%, a report showing that inflation in Japan remained at 2.1% in May. However, after excluding energy and fresh food costs, core inflation remained at 0.8%. And Japan’s central bank is unlikely to follow the lead of the Fed and other central banks in raising interest rates, analysts said.
AP Business Writer Elaine Kurtenbach contributed.
Stan Choe and Alex Veiga, The Associated Press