Stocks rally, driving Wall Street toward rare winning week

NEW YORK –

Stocks are rising again on Friday and Wall Street is headed for its second winning week in 12 to offer some relief from the brutal sell-off of this year.

The S&P 500 was 2.3% higher in midday trading. It is on track for a 5.7% increase for the week. However, it is still close to 20% lower than its record set earlier this year.

The Dow Jones Industrial Average was up 629 point, or 2.1% at 31,306, as per 12:30 p.m. ET. The Nasdaq composite, however, was 2.3% higher.

Stocks rose this week as investors speculate that the U.S. Federal Reserve might not be as aggressive in raising interest rates than previously thought.

It’s a relief from Wall Street’s slide through most of the year due to the Fed’s and other central bank’s slamming into reversal on the enormous support that was fed into markets through this pandemic. Central banks have increased interest rates and made other moves to lower investment prices in an attempt to reduce the inflation that is so severe. This could lead to a recession. These moves will continue to increase.

While parts of the U.S. economy remain hot, especially the jobs market, there have been some troubling signals recently. A Friday report confirmed that sentiment among consumers fell to its lowest level since records were kept by the University of Michigan. This was due in part to high inflation. Another sign that the U.S. manufacturing- and service sectors aren’t as strong this week as economists thought was another lowlight.

This weakening data raises concerns about the strength the economy. They can be beneficial to financial markets, despite how paradoxical this may sound.

They could lead to less inflation pressure and, therefore, the Federal Reserve wouldn’t need raise rates so aggressively. Interest rates are the driving force behind trading in everything, from stocks to cryptocurrencies.

Markets could take particular value from one nugget in the consumer mood report. It showed that consumers’ expectations of inflation in the long-term have slowed to 3.1%, from 3.3% at the mid-month. This is crucial for the Fed as higher inflation expectations can cause buying activity, which in turn can inflame inflation further in a vicious cycle.

Last week, Fed raised its key short term rate by the largest margin since decades. saidAnother increase in such cases could be possible, but they wouldn’t be widespread.

Investors have been modestly increasing their expectations about how high the Fed would raise interest rates early next year, as evidenced by their modest reduction in expectations over the last week.

This has helped Treasury market yields to fall. The two-year Treasury yield, which tends move in line with expectations for Fed actions, has dropped to 3.05% from 3.40% in mid-last week.

The yield on the 10-year Treasury which is the foundation of the global financial system, rose to 3.12% Friday from 3.07% on Thursday. However, it has slowed after hitting 3.48% last Wednesday.

It began the year slightly above 1.50%.

A separate economic report released Friday showed unexpectedly higher sales of new houses last month. However, the trend in housing has been largely lower due to the Fed’s most recent hikes.

Higher mortgage rates are hurting this industry. A separate report earlier in the week showed that sales of previously occupied homes have slowed last month due to higher prices.

LendingTree, an online marketplace that helps people find mortgages, warned Friday that rising mortgage rates caused it to report lower revenue for the second quarter than previously forecast. Its stock fell 8.8%.

Wall Street was moving in the opposite direction for the vast majority. More than 90% of the stocks in the S&P 500 were rising.

Carnival cruise operator was close to the top of the pack with a steaming 11% higher. It reported weaker than analysts expected results for its latest quarter, but it also saidBooking trends are improving.

FedEx’s earnings forecast for this fiscal year was higher than some analysts expected, resulting in a 7% increase.

Other markets around world rallied Friday as well.

London’s FTSE 100 gained 2.7%, Germany’s DAX returned 1.6%, and France’s CAC40 jumped 3.2%.

Tokyo’s Nikkei225 increased 1.2% following a report that showed Japan’s inflation at 2.1% in May. However, the underlying inflation remains at 0.8% after removing costs for energy and fresh foods. Analysts predict that Japan’s central banking will not follow the Fed’s lead in raising interest rates. said.

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AP Business Writer Elaine Kurtenbach contributed.