Wall Street closes higher but still ends week in the red

NEW YORK –

Wall Street stocks rebounded from a disappointing start to Friday and ended broadly higher on Friday. However, the rebound was not enough for them to make up their losses for the week.

The S&P 500 rose 1.1% after having been down 0.9% in the early going. This gain ended a four-day losing streak by the benchmark index, which had been down 0.9% in the early going. However, it still posted its fourth consecutive losing week in the last five.

After a decline in technology stocks, the Dow Jones Industrial Average climbed 1% and the tech-heavy Nasdaq gained 0.9 percent.

The latest choppy trading comes a day after the S&P 500 closed out its worst quarter since the onset of the pandemic in early 2020. Its performance in 2022’s first half was the worst since 1970’s first six months.

The S&P 500 has been in a bear market since last month, meaning an extended decline of 20% or more from its most recent peak. It is now down 20.2% compared to the peak it reached at the beginning of the year.

The yields on bonds fell significantly. The yield on the 10-year Treasury which helps to set mortgage rates fell to 2.89% last Thursday from 2.97%. The yield on 2-year Treasury fell from 2.92% to 2.83%.

The market’s severe slump this year is due to investors’ fear over rising inflation and the possibility that higher rates could lead to a recession.

“What we are seeing today is reflective really of what we’re going see here in July. That is continuing pressure on the markets unless we see outsized reports on jobs and inflation or some meaningful change in Fed policy.” said Greg Bassuk, CEO at AXS Investments.

The S&P 500 rose 39.95 to 3,825.33. The index ended higher for roughly 85% of the stocks.

The Dow gained 321.83 to 31,097.26, while Nasdaq climbed 99.11 to 11,127.85. The Russell 2000 index for smaller companies rose 19.77 point, or 1.2%, at 1,727.76.

A long holiday weekend is preceded by the market’s most recent gyrations. Monday, Independence Day will see the U.S. close its financial markets.

Wall Street remains concerned about the potential for a recession as the Federal Reserve increases interest rates aggressively and economic growth slows. The Fed raises rates to slow down economic growth to cool inflation. However, it could go too far and cause a recession.

Inflation is still high and the economy is slowing, according to economic data. Wall Street has hoped that the Fed will eventually relax its aggressive push to raise rates. This has weighed on stocks, particularly those in technology and more expensive sectors. Analysts don’t anticipate stocks to rally until there are clear signs that inflation is cooling.

Friday’s economic update for the manufacturing sector showed a continued slowdown in growth, which was more than economists expected. On Thursday, a report showed a 6.3% increase in inflation, which is closely monitored by the Fed, in May. This was unchanged from its April level.

An alarming report earlier this week revealed that consumer confidence dropped to its lowest point in 16 months. The government reported that the U.S. economy shrank at 1.6% per year in the first quarter. Weak consumer spending was also a key component of that contraction.

Kohl’s jumped 19.6% after the potential sale of the department store fell apart amid a weak retail environment that saw consumers lose confidence and reduce spending. Kohl’s had exclusive talks with Franchise Group (owner of Vitamin Shop and other retail outlets) for a deal potentially worth around $8 billion.

The market rally was also led by other retailers, restaurants chains, and companies that rely heavily on direct consumer spending. Amazon rose 3.2% while Home Depot gained 1.8% while Starbucks rose 3.8%

Stocks in banks and health care stocks also saw gains. Wells Fargo rose 1.9% and Johnson & Johnson closed 1.1% higher.

Although technology stocks recovered from their morning slump, many closed lower. Micron, a chipmaker, fell 3% after Micron gave investors a disappointing profit forecast due to concerns about falling demand. This weighed heavily upon other chipmakers. Nvidia lost 4.2%, while Qualcomm lost 3.3%.