By DAMIAN J. TROISE and ALEX VEIGA – AP Business Writers
Wall Street capped a choppy week of trading with a broad stock market rally on Friday, as the S&P 500 posted its fourth consecutive weekly gain.
The benchmark index closed up 1.7%, for a weekly gain of 3.3%. The S&P 500 hadn’t posted such a strong streak since November.
The Dow Jones Industrial Average rose 1.3%, while the Nasdaq and Russell 2000 Small Company Indexes both closed up 2.1%. Each index also posted a strong weekly gain.
Tech stocks were a big contributor to the rally. Crude oil prices fell and bond yields were mixed.
Trade was choppy for much of the week, but major indexes rose sharply on Wednesday after a report showed inflation cooled more than expected last month. Another report on Thursday showed that wholesale inflation also slowed more than expected.
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Weaker-than-expected inflation figures bolstered investor hopes that inflation could be close to a peak and that the Federal Reserve could raise interest rates less aggressively, its main tool in the fight. against inflation.
“The data we got this week is all consistent with the idea that we’re in the middle of peak inflation rates on a monthly basis,” said Scott Ladner, chief investment officer at Horizon Investments. “And that’s something we’ve been waiting to see for months now. And it looks like, if that’s the case, we’ve probably seen a spike in Fed hawkishness as well.”
The S&P 500 rose 72.88 points to 4,280.15, while the Dow gained 424.38 points to 33,761.05. The Nasdaq added 267.27 points to 13,047.19.
Small company stocks also made strong gains, a sign that investors are confident in the economy. The Russell 2000 rose 41.36 points to 2,016.62.
About 95% of S&P 500 stocks rose, with technology companies driving much of the rally. Chipmaker Nvidia rose 4.3%.
The central bank has hiked interest rates in hopes of slowing the economy and calming the highest inflation in four decades, but investors fear it will curb too aggressively and plunge the economy. economy in a recession.
On Friday, a University of Michigan survey showed that consumer sentiment is stronger than economists expected. Yet inflation remains painfully high. This means that the Fed is likely to stay the course with its rate hikes until it is certain that prices have peaked and eased.
The last two Fed increases were 0.75 percentage points. Traders now see around a 60% chance that the central bank will raise overnight interest rates by half a percentage point at its next meeting.
“Market strength is based on the assumption that inflation has peaked and the Fed can relax, but that may be a bit too complacent,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. .
The 10-year Treasury yield fell to 2.84% from 2.88% on Thursday evening. It remains below the two-year yield. This is an unusual reversal of the expectation that borrowing money for a longer period should cost more than a shorter period. When investors demand a higher yield in the short term like 2 years than a longer one like 10 years, some investors see it as a reliable signal of an impending recession. The economy has already contracted for two consecutive quarters.
Next week, the Commerce Department releases its retail sales report for July and retail giant Walmart releases its latest financial results.
Investors can also gauge the health of the housing market when they receive a home sales report for July and the latest earnings from Home Depot.
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