The Dow Jones Industrial Average rallied 700 points on Friday, coming off the lows of the bear market last week, and looking poised to cap the first positive week in June.
The Dow rose 719 points, or 2.4%, with gains accelerating in the final hour of trading. The S&P 500 was 2.6% higher, while the Nasdaq Composite advanced 2.7%.
The major averages are wrapping up a big comeback week for stocks. The S&P 500 is up 5% for the week, while the Nasdaq Composite is up 6% and the Dow is 4% higher.
Those moves followed the worst weekly decline for the S&P 500 since 2020. Last week, the broader market index closed down 5.8% for the week.
Many market participants on Wall Street maintained a gloomy outlook even with all three major averages looking to snap three-week losing streaks.
“We believe that bounce in U.S. equity markets over the past three trading days has been a bear market rally off deeply oversold conditions,” Wolfe Research’s Chris Senyek wrote in a Friday note.
“While there may be some additional near-term follow through, we believe that our intermediate-term bearish base case remains intact and that the next leg down is going to be driven by rising recession risks and downward earnings revisions,” Senyek added.
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Still, the major averages leapt after a consumer sentiment reading that’s closely followed by the Federal Reserve showed a slight easing of inflation expectations.
Consumer sentiment hit a record low reading of 50 in June, according to a University of Michigan survey released Friday morning. While on the surface that is not positive for the market, investors liked a figure inside the report which showed 12-month inflation expectations by consumers easing back to 5.3%.
A preliminary reading earlier this month that was pivotal in influencing the Fed to get more aggressive with its rate hike showed inflation expectations at 5.4%.
“On balance, sentiment is mixed,” wrote Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. “Consumers are getting out and paying for ‘experiences,’ namely travel, leisure, beauty items, household essentials, etc. Elevated inflation, particularly higher food and energy costs, are among headwinds widely expected to crimp discretionary spending in the near-term.”
The rally was broad-based, with 488 stocks in the S&P 500 in the green. All 11 sectors were up for the day.
Cruise line stocks led the S&P 500 gains. Shares of Carnival Corporation rallied 11% after the company reported booking volumes in its most recent quarter were “nearly double” the volumes in the first quarter, meaning the company saw its “best quarterly booking volumes since the beginning of the pandemic.”
Royal Caribbean Group surged 15%. Norwegian Cruise Line Holdings’ gained 14%.
Financials were the best-performing sector in the broader market index after the Federal Reserve released the results of its annual “stress test.” The central bank said a succession of the nation’s largest banks have strong pools of capital to weather a severe recession.
Wells Fargo’s stock price jumped 7%. Capital One’s popped 6%.
On the corporate front, shares of FedEx surged 7% despite a mixed fourth-quarter report after the logistics company delivered an upbeat earnings forecast.
Volatility on Wall Street is expected to be elevated Friday, as FTSE Russell completes its annual index rebalancing, shifting the makeup of tracking indexes that contain trillions of dollars. Rebalancing days are typically accompanied by heavy trading volumes as well.
Among the biggest changes will be the additions of tech companies such as Meta and Netflix to the Russell 1000 value index after their stock tumbles this year, according to a Wall Street Journal report. Shares of Meta and Netflix spiked 6% and 5%, respectively.
