The main indexes on Wall Street recorded some big gains on Friday thanks to a broad rally, due to signs of a slowdown in economic growth. Likewise, a fall in commodity prices also boosted expectations about the US Federal Reserve tempering its plans of aggressive rate hikes.
There was a 3% rise in the S&P 500 index, which was its biggest percentage rise in a day since May 2020. All 11 sectors of the benchmark index recorded gains of about 1.5% each. This week, stocks were on a rebound, as financial markets were dealing with concerns that an aggressive hike in interest rates by the Fed for taming inflation could dip the economy into recession.
Nonetheless, investors are still trying to figure out when the markets will start bottoming out, as the S&P 500 index entered into a bear market earlier in the month when it dropped by more than 20% from its highest closing value in January.
Market analysts said that a lot of capital had not moved out because the sellers had just gotten exhausted. Therefore, this rally could be a brief one and there is a strong possibility that things are going to reverse quickly.
There was a 2.68% gain recorded in the Dow Jones Industrial Average, or 823.32 points, which pushed it to 31,500.86. Similarly, a 3.06% increase was recorded in the S&P 500 index or 116.01 points which led it to 3,911.74. A 3.34% gain was also seen in the Nasdaq Composite, which equaled to 375.43 points and took it to 11,607.62.
The weekly gain for the S&P 500 index was 6.4%, 5.4% for the Dow, and 7.5% for the Nasdaq. The end of the session saw trading volumes surge, as it also ended the reconstitution of the indexes by FTSE Russell that are tracked by investors’ funds worth trillions of dollars.
On Friday, results of a survey showed that there was a record drop in US consumer sentiment for June, but the inflation outlook recorded a marginal improvement. On Thursday, data showed that business activity had slowed down in the month of June.
The week also saw commodity prices record a sharp drop. Earlier in June, the Refinitiv/CoreCommodity index had reached a peak of multiple years. It measures the prices of metals, agriculture, energy, and several other commodities. However, on Thursday, this index had declined to a low of two months.
Now traders of fed funds futures believe that benchmark interest rates will hit 3.5% next year in March, as opposed to the 4% expected previously. Market analysts said that the equity markets had gained strength primarily because of expectations of a slowdown in interest rate hikes.
There was a rally in bank stocks, as a 3.7% rise was recorded in the S&P 500 banks index. This was after the ‘stress test’ of the Fed, which showed that there was enough capital for lenders to be able to pull through an economic downturn, should one occur.