Stocks swelled Friday, lifting the Dow more than 800 points and giving Wall Street a badly needed win after weeks of tumult.
All three indexes snapped a three-week losing streak and ended the holiday week — Wall Street was closed Monday for Juneteenth — with hefty gains. The S&P 500 advanced 6.5 percent over the four-day span, according to Bloomberg; a week earlier, the broad index turned in its worst week since March 2020 and sank into a bear market, defined as a 20 percent drop from a recent high, as investors digested the Federal Reserve’s decision to raise its benchmark interest rate by three-quarters of a percentage point, as well as mounting evidence that consumers are cutting back and growth is slowing.
The Dow climbed 5.4 percent for the week, while the Nasdaq soared 7.5 percent.
Investors have been grappling with growing pessimism about the state of the economy, particularly soaring prices and rising interest rates. In two days of congressional testimony this week, Federal Reserve Chair Jerome H. Powell reiterated the central bank’s commitment to curbing soaring inflation with aggressive monetary policy, even in the face of a possible recession.
“Even though the market has started to recover, the concerns that caused the bear market are still with us, such as inflation, an aggressive Federal Reserve, high oil prices and geopolitical tensions,” Zach Stein, chief investment officer in Carbon Collective, said in a commentary Friday.
Oil prices rose Friday as supply continued to tighten. Brent crude, the international benchmark, jumped more than 3.1 percent and traded above $113 per barrel. West Texas Intermediate crude, the main U.S. benchmark, climbed 3.3 percent to nearly $108 per barrel. Still, that’s a significant pullback since last week, when both were hovering near $120.
“Oil prices typically decline during recessions and the oil market is pricing in rising recession risk,” Stein said.
Pump prices also fell, with the national average settling at $4.93 a gallon on Friday, according to AAA. Last week, the average breached $5 for the first time.
Inflation remains the top concern to consumers, as the costs of gas, groceries and other basics continue to rise. A University of Michigan survey found that the consumer sentiment index fell to 50 in June, compared with May’s level of 58.4 and 85.5 a year ago. Rising inflation has eroded living standards for many consumers, and fueling even more economic uncertainty.
As a result, they are shifting away from services such as restaurants and tourism. “As higher prices become harder to avoid, consumers may feel they have no choice but to adjust their spending patterns, whether through substitution of goods or foregoing purchases altogether. The speed and intensity at which these adjustments occur will be critical for the trajectory of the economy,” wrote Joanne Hsu, director of the surveys.
Unemployment also exceeded economists’ expectations. Initial jobless claims, a proxy for layoffs, reached 229,000 last week, the Department of Labor reported Thursday. That’s 4,000 more than the consensus estimate, according to Charles Schwab’s derivative trading manager Robert Abraham.