Wall Street set for weekly gain, boosted by growth stocks
Wall Street’s main indexes extended gains on Friday afternoon and were set to snap a three-week losing streak, as investors piled into technology and high-growth stocks ahead of key U.S. inflation data next week.
The gains came on the back of a sharp sell-off beginning in mid-August triggered by concerns about the impact of tighter monetary policies and signs of an economic slowdown in Europe and China.
Analysts said this week’s market recovery is more related to previous overselling, as uncertainty remains high with regard to inflation and how aggressive the Federal Reserve will be in implementing interest rate hikes.
“It’s not surprising we get a little bit of a bounce like we’re getting here, as a lot of this is technical,” said Jack Janasiewicz, lead portfolio strategist and portfolio manager at Natixis Investment Managers Solutions.
“I wouldn’t be shocked if we started the week off with a little bit more strength and then we sort of settle down and give back a little bit as we get ready for the CPI,” he added.
Investors are awaiting August’s consumer prices (CPI) report on Tuesday for any signs that inflation may be easing. It is expected to show that prices rose at an 8.1% pace over the year in August, compared with 8.5% in July.
Wells Fargo economists expect headline inflation to log its steepest monthly decline since the peak of the pandemic in April 2020, helped by a pullback in gas prices.
All 11 major S&P sectors traded higher, with communication services, technology, energy and consumer discretionary leading the way.
High-growth stocks such as Tesla, Apple Inc , Alphabet Inc and Amazon.com Inc gained between 1.8% and slightly over 3%.
Fed Chair Jerome Powell said on Thursday that the U.S. central bank is “strongly committed” to controlling inflation but there remains hope it can be done without the “very high social costs” involved in prior inflation fights.
Several other Fed policymakers have also reiterated their commitment to fighting runaway inflation in recent weeks, making investors jittery about the prospects of another outsized interest rate hike from the Federal Reserve.
Traders are pricing in an 88% chance of a 75 basis point rate hike at the next meeting, up from 57% a week earlier, according to CME Group’s Fedwatch Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html?redirect=/trading/interest-rates/fed-funds.html.
The CBOE volatility index, a gauge of investor anxiety, fell to a two-week low of 22.64 but stayed above its long-term average of about 20.
At 2:37PM ET, the Dow Jones Industrial Average rose 408.12 points, or 1.28%, to 32,182.64, the S&P 500 gained 61.37 points, or 1.53%, to 4,067.55 and the Nasdaq Composite added 232.85 points, or 1.96%, to 12,094.98.
U.S. equity funds recorded outflows of $11.5 billion in the week to Wednesday, their largest outflow in 11 weeks, BofA said on Friday.
Kroger Co rose 6.9% after the grocer raised its annual forecast.
Shares of Tapestry Inc rose 2.4% after the luxury handbag maker said it expects revenue of $8 billion by fiscal year 2025.
Advancing issues outnumbered declining ones on the NYSE by a 5.88-to-1 ratio; on Nasdaq, a 2.75-to-1 ratio favored advancers.
The S&P 500 posted seven new 52-week highs and no new lows; the Nasdaq Composite recorded 42 new highs and 54 new lows. (Reporting by Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Anil D’Silva, Maju Samuel and Cynthia Osterman)