The S&P 500 gained on Friday and headed for its best week since June, as a report showing slowing inflation on Thursday raised hopes that the Federal Reserve will soon slow its tightening campaign.
The S&P 500 added 0.1%, bringing its gain for the week to more than 5%, its best week since ending June 24 this year. The Nasdaq Composite added 0.7% as investors continued to buy tech stocks on hopes that interest rates will drop. The Dow Jones industrial average was the biggest outlier, losing 0.7% as shares of defensive stocks UnitedHealth and Merck fell.
The Dow rose more than 1,200 points on Thursday after a smaller-than-expected increase in consumer prices in October, giving investors hope that inflation may cool. The S&P rose 5.5% and the Nasdaq Composite rose 7.4%. It was the best day since 2020 for all three.
Treasury yields fell on Thursday on weaker-than-expected inflation and continued to fall on Friday. The 10-year Treasury yield stood at 3.82% on Friday after ending last week at 4.16%.
“From an equity market perspective, as long as the threat of much higher rates is out of the way, this should remove a major headwind,” Barclays’ Emmanuel Cau wrote in a note on Friday.
Tech stocks led cryptocurrencies lower on Friday, which came under pressure on Friday after FTX announced it was filing for bankruptcy and CEO Sam Bankman-Fried resigned. Bitcoin fell 6% and Ether declined more than 7%. Technology stocks and related crypto stocks rallied after opening lower on Friday.
All indices are poised for a winning week. The Dow is up 4% on the week, while the Nasdaq Composite is up more than 7%. This week is a resumption of a bear market recovery that began in mid-October but stalled in recent weeks. The S&P 500 is up nearly 14% from its bearish low, but is still down 16% for the year.
“Yesterday’s strength was remarkable, it was remarkable, it was historically significant, but it’s one day. It’s just one day. And we can’t read too much into it when we’re still in a volatile period within a macro environment of downtrend and challenging,” said Bill Merz of US Bank Wealth Management.