Wall Street’s major stock indexes closed higher on Friday, regaining some of the ground lost earlier in the week as investors again flocked to big tech stocks following a broad sell-off and inflation data stoked optimism that interest rate cuts could soon begin.
The Dow Jones Industrial Average surged 800 points, closing at 40,589.34, up 654.27 points, or 1.6%, as the index finished the week in positive territory.
The S&P 500 and Nasdaq each rose 1%, but both were down for a second straight week.
Industrial conglomerate 3M boosted the Dow Jones Industrial Average by sending its shares up 23 percent after it raised the lower end of its full-year adjusted profit forecast.
Chip-related stocks led the tech recovery, with the Philadelphia SE Semiconductor Index snapping a three-session losing streak and Nvidia, Intel, Broadcom and Qualcomm rising 0.7% to 2.7%.
The so-called “Magnificent Seven” stocks were mixed, with Tesla and Alphabet falling less than 1%, while Apple, Microsoft, Meta Platforms and Amazon rose between 0.2% and 2.7%.
The 10-year Treasury yield turned lower after the inflation data was released.
The data showed that the Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation gauge, rose 0.1% in June from the previous month and 2.5% from a year earlier, both in line with expectations, but personal income fell short of expectations.
The moderate rise in prices underscores the improving inflation environment and suggests the Fed may begin easing monetary policy in September.
Greg Bootle, head of U.S. equity and derivatives strategy at BNP Paribas, said a number of factors come into play to explain why markets are so susceptible to periods of volatility, including this week.
“You’ve got (portfolio) positioning, the election, the CPI, the Fed, earnings season, all of these things moving in slightly different directions, so it’s a little hard for people to decipher what’s going on,” he said.
Economically sensitive small caps rose, helping the Russell 2000 rise 1.7%, its third straight week of gains.
After the data was released, expectations of a 25 basis point cut at the Fed’s September meeting held steady at around 88%, according to CME FedWatch. Traders still broadly expect two rate cuts by December, according to LSEG data.
“Next week will be an even busier earnings week than this one, and after a tough week the market could see a summer Friday rally,” Meckler said.
Concerns about Wall Street’s increasing reliance on a set of high-momentum stocks that are now believed to be overvalued are making underperforming sectors such as small and mid-cap stocks look more attractive now that an early rate cut is expected.
On the revenue side, Deckers Outdoor Inc. rose 6.3 percent after raising its full-year profit outlook, while oil services company Baker Hughes Inc. rose 5.8 percent after second-quarter profit beat expectations.
Medical device maker Dexcom Inc. saw its shares fall 41% after it cut its full-year earnings forecast.
Of the 206 S&P 500 companies that have reported second-quarter profits so far, 78.6% beat analyst expectations, according to LSEG data.
