US equities rose sharply Friday morning, following five down days, on good retail sales data and a moderation in inflation expectations while a mixed batch of bank earnings helped propel financial stocks higher.
How are stocks trading?
The Dow Jones Industrial Average DJIA
rose 650 points, or 2.1%, to 31,248.
The S&P 500 SPX
gained 67 points, or 1.8%, to trade at 3,858.
The Nasdaq Composite COMP
advanced 169 points, or 1.5%, to 11,420.
On Thursday stocks ended down, but off session lows. Major indexes remained on track for weekly losses.
What’s driving markets?
Stocks climbed after US retail sales rose by 1% in June, a slightly stronger number than economists had expected. Although some of the increase was tied to higher prices of gasoline and food, markets celebrated the fact that the all-important consumer has not succumbed to the surge in prices driven by the strongest inflation in four decades.
“The retail sales number is telling us that the consumer is still out there,” said Steve Sosnick, chief strategist at Interactive Brokers.
However, Mohannad Aama, a portfolio manager at Beam Capital Management, pointed out that recent bank earnings tell us that still-robust consumer spending is being funded by credit-card debt, which could lead to problems down the road.
Stocks also benefited from the University of Michigan consumer sentiment index and gauge of inflation expectations. The sentiment index rose to 51.1 from the June reading of 50, which was the lowest level in decades. Consumer expectations for inflation over the next year moderated slightly, as did their expectations for price pressures over the next decade — likely a reflection of lower commodity prices.
Also on the economic calendar: US industrial production output was off 0.2% in June for the first time this year, while the number for the previous month was revised lower.
Citigroup Inc. shares rallied after the company reported second-quarter profits that were more robust than analysts had anticipated, even though income had fallen compared to the same quarter last year. Wells Fargo & Co. shares managed to shrug off a relatively weak earnings report, as a slowdown in its mortgage-lending weighed on revenue while larger provisions for credit losses constricted profits.
St. Louis Fed President James Bullard backed a more aggressive pace of rate hikes this year when he said Friday that he would like to see the Fed funds rate rise to a range of 3.75% to 4%, up from his previous year-end target of 3.5 %. Offering a somewhat more dovish take, Atlanta Fed President Raphael Bostic helped reassure markets by saying that “dramatic” moves by the Fed could undermine the US economy. Investors promptly reduced odds of a 100 basis point Fed hike later this month following Bostic’s comments, which helped push stocks higher after the open.
Comments by Federal Reserve officials have been an important factor driving markets this week. Stocks pulled back from deeper losses on Thursday after Federal Reserve Gov. Christopher Waller and St. Louis Fed President James Bullard both voiced support for 75 basis point interest rate hikes. That’s after markets had sold off over concerns that a 100 basis point hike was likely at the July 26-27 Fed meeting, following this week’s data that showed the strongest jump in consumer prices in four decades.
In other economic news, China reported the economy grew just 0.4% annually in the second quarter, as Beijing’s stringent COVID-19 lockdowns have taken a toll on economic activity. Economists polled by The Wall Street Journal expected a rise of 0.9%. The economy contracted 2.6% in the April to June period from the previous quarter, marking the first quarterly contraction since the first quarter of 2020.
and Wells Fargo & Co.
shares were among the best performers on the S&P 500 Friday morning, up 8.5% and 5.9% respectively. Several other banks stocks, including Bank of America Corp.
and State Street Corporation
Bank of New York Mellon
was also up 4.5% as financials led the S&P 500 higher.
shares rallied more than 3% after the company’s profits exceeded $5 billion during the second quarter.
shares surged 13% on reports that Elliott Management, a large activist investor, had taken a stake in the social-media player.
The ICE US Dollar Index DXY,
a gauge of the dollar’s strength against a basket of rivals, was down 0.4%, while the 10-year Treasury yield BX:TMUBMUSD10Y
was down 2.3 basis points at 2.937%.
Hong Kong’s Hang Seng index HSI00
was down 2.2%, while Japan’s Nikkei 225 JP:NIK
benchmark index was up 0.5%.
Europe’s STOXX 600 XX:SXXP
was up 1.2%, while the UK’s FTSE 100 UK:UKX
was down 0.7%.
West Texas Intermediate crude futures CL
were up 2.2% at $97.82 a barrel.