Shares rose Friday as traders digested another batch of banking earnings and strong sales for June, allaying some concerns that the Federal Reserve could raise interest rates aggressively to tame high inflation.
The Dow Jones Industrial Average shot up 613 points or 2%. The S&P 500 was up 1.76% and the Nasdaq Composite was up 1.52%, but shares held steady for weekly losses.
A new round of banking results from Wells Fargo and Citigroup offered further insight into the state of the economy. Wells Fargo rose 7.3% even as quarterly profits fell 48% and the bank set aside money for bad loans. Citigroup rose 10% as it beat estimates and benefited from rising interest rates.
The day before, investors were combing through troubling reports from JPMorgan Chase and Morgan Stanley that kicked off major bank gains, as well as weighing the likelihood of larger Federal Reserve rate hikes and looming recession worries.
That, coupled with strong preliminary data on consumer confidence and retail sales for June, seemed to allay some concerns that the Fed could increase 100 basis points in upcoming policy meetings. It also indicated that consumers are driving retail spending even as inflation hits record highs.
These results are a sign of relief for stocks, reducing the likelihood of a steeper rise. However, there is still a 75 basis point increase for July, said Kathy Bostjancic of Oxford Economics.
Friday’s results motivated a broad rally across the S&P 500. All major sectors in the S&P 500 rose on the day, with the exception of utilities, which moved slightly lower.
Financials were up more than 1%, boosted by bank stocks. Marathon Petroleum and Valero Energy each rose 2% as oil prices rose. Shares of Tesla, Nvidia, Amazon Alphabet and Meta Platforms gained more than 1%.
At the same time, shares of UnitedHealth, American Express and Salesforce led the Dow’s recovery, each up more than 2%.
For the week, the Dow is down 0.4%, while the S&P and Nasdaq are down 1.36% and 1.03%, respectively.
“The market appears to be welcoming the news, although retail strength can only add fuel to the Fed’s fire to continue its campaign of rate hikes to cool the economy and tame inflation,” said Mike Loewengart. , director of investment strategy at Morgan Stanley’s E-Trade Capital Management, noting that the numbers are not adjusted for inflation.
In company news, Pinterest shares rose 14.7% after a Wall Street Journal report said activist investor Elliott Management took a more than 9% stake in the social media company. UnitedHealth bounced 4.7% on strong quarterly results.