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Stocks are heading higher after the Dow Jones’ biggest loss in a year

US stocks closed higher on Friday as Wall Street appeared to recover from the Dow Jones’ biggest drop in more than a year.

The S&P 500 (^GSPC) rose about 0.3%, while the tech-heavy Nasdaq Composite (^IXIC) gained about the same amount. The blue-chip Dow Jones Industrial Average (^DJI) was down about 0.1%, or about 50 points.

Renewed concerns about interest rates drove Thursday’s rout, led by the Dow Jones falling more than 600 points. Meanwhile, US Treasury yields rose again, with the benchmark 10-year yield (^TNX) hovering closer to 4.5%.

The upbeat mood turned sour after stronger-than-expected US corporate data prompted a rethink of the Federal Reserve’s interest rate policy.

Traders are about evenly split on whether the central bank will cut rates at its September meeting, CME’s FedWatch tool shows. That marks a significant shift from a few days ago, when only about a third expected the Fed to remain steady at its first meeting this fall. Goldman Sachs said Friday it no longer expects the Fed to make its first rate cut in July, but suggested September was most likely.

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But Wall Street could be in better spirits heading into the holiday weekend. Nvidia (NVDA), whose latest blowout quarter led to an early rally on Thursday, rose no more than 1% on Friday to hover around $1,040 per share. The upcoming stock split could fuel even more retail interest in its shares.

The macroeconomic front is highlighted Friday by a revised look at the University of Michigan’s consumer sentiment index for May. An earlier read showed the index tumbling this month as concerns about inflation and interest rates hit America’s view of the economy.

Live2 updates

  • Stocks are rising in a recovery for the Dow Jones

    U.S. stock prices rose again on Friday as Wall Street tried to bounce back from the Dow Jones’ biggest rout in more than a year.

    The S&P 500 (^GSPC) rose about 0.3%, while the tech-heavy Nasdaq Composite (^IXIC) gained about the same amount. The blue-chip Dow Jones Industrial Average (^DJI) rose 0.2%, or about 80 points.

  • Where the heads of investors are…

    Some interesting insights into the psyche of investors from the JP Morgan team this morning.

    Their new survey of 850 investors found:

    • The asset class with the highest return in 2024 is expected to be equities (51%), with a majority having a slightly bullish view on the S&P 500 and expecting the index to be at 5,250-5,750 by the end of the year (55 %) will be displayed.

    • Majorities agreed that the Federal Reserve’s next step will be a rate cut (69%), expected at its September meeting (49%).

    • The biggest threat to markets this year was geopolitical unrest (mentioned by 35%) and resurgent inflation (32%).

    • As for the US presidential election, investors were almost evenly divided over whether the Republican (51%) or Democratic (49%) candidate would win.

    • 30% of respondents expected a Republican victory to lead to a risky environment for the markets.

    • 27% thought a Republican victory would have no material impact on the market.

    • 21% expected a Democratic victory would have no material impact on the market.

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