US Stocks Rally to Weekly Gain 03/05 16:27
Wall Street capped a volatile day of trading Friday with a broad rally that
snapped the market's three-day losing streak.
(AP) -- Wall Street capped a volatile day of trading Friday with a broad
rally that snapped the market's three-day losing streak.
The S&P 500 gained 2% after clawing back from a 1% skid that followed a 1%
surge at the start of trading. Other stock indexes went through similar
zigzags, but finished with solid gains.
The late-afternoon turnaround made up for some of the losses that the market
began racking up after kicking off the week with the S&P 500's biggest gain
since June. The index, which briefly slipped into the red for the year on
Thursday, managed to end the week 0.8% higher, its first weekly gain in three
The market's latest gyrations came as investors struggled to figure out what
an encouraging report on the economy and the recent march higher for bond
yields should mean for the market.
"Ultimately, investors will conclude that they'll be happy to take the bad
with the good," said Sam Stovall, chief investment strategist at CFRA. "The bad
thing being higher interest rates and the good being an improvement in the
The S&P 500 rose 73.47 points to 3,841.94. The Dow Jones Industrial Average
gained 572.16 points, or 1.9%, to 31,496.30. Earlier, it had been down 157
points. The Nasdaq composite climbed 196.68 points, or 1.6%, to 12,920.15. The
tech-heavy index earlier flipped between a gain of 1.2% and a loss of 2.6%.
Smaller company stocks outgained the broader market, as they have all year.
The Russell 2000 index picked up 45.29 points, or 2.1%, to 2,192.21.
The spark for all the uncertainty Friday was a government report that showed
employers added hundreds of thousands more jobs last month than economists
expected. That's an encouraging sign for the economy, and it helped lift
Treasury yields, with the closely watched 10-year yield momentarily topping
The yield later fell back from that midday spike and wound up at 1.56%, only
slightly higher than a day earlier. It remains well above its roughly 0.90%
level at the end of last year.
While the jobs report was encouraging in terms of jobs added by the economy,
wage growth --- an inflation bellwether --- rose last month in line with
expectations. That may have helped ease some bond investors inflation worries,
at least for now.
"That sort implied, 'OK, at least this report doesn't point to a surge in
inflation," Stovall said.
That view could change next week, when the government issues its latest
consumer and wholesale price data.
For about a year, the stock market kept climbing on expectations that an
economic recovery was on the way, even when the coronavirus pandemic meant
conditions at the time seemed very bleak. Now that the recovery is much closer
on the horizon, the market is unsettled because one of the main underpinnings
for that incredible run is under threat: ultralow interest rates.
Yields have been marching higher with rising expectations for the economy's
growth and for the inflation that could accompany it. Economists have been
upgrading their forecasts for this year as more people get COVID-19 vaccines,
businesses reopen and Congress gets closer to pumping another $1.9 trillion of
financial aid into the economy.
The worry is that inflation could take off, or something else could happen
to jack yields up even further.
It's the speed at which Treasury yields have climbed that has gotten Wall
Street so uncomfortable, more than the actual level, which is still low
relative to history.
Higher yields put downward pressure on stocks generally, in part because
they can steer away dollars that had been headed for the stock market and into
bonds instead. That makes investors less willing to pay as high prices for
The pressure is most intense on stocks that look the most expensive,
relative to their profits, as well as those bid up on expectations of fast
growth far into the future. Critics say most stocks across the market look
expensive after prices climbed much, much faster than profits, and warnings
about a possible bubble have been on the rise.
Tech stocks and other high-growth companies in particular have been at the
center of the downdraft. They soared more than the rest of the market for much
of the pandemic, and in the years preceding it. On Friday, Tesla was the
heaviest weight dragging on the S&P 500. The stock fell 3.8% and is now down
15.3% so far this year.
It's another reminder of how dominant Big Tech stocks have become in the
market. If inflation does ultimately remain under control, as the Federal
Reserve's chair and many economists expect, the general expectation along Wall
Street is that most stocks could benefit.
A stronger economy would mean bigger profits for companies, which would
allow their prices to hold steady or rise, even if rates are climbing.
By Friday afternoon, the vast majority of stocks in the S&P 500 had
rebounded. Energy producers made some of the largest gains. Diamondback Energy
jumped 4.9%, and Chevron gained 4.3% after the price of U.S. crude oil rallied
Tech stocks would likely also see some improvement in their profits, just
not to the same degree as companies whose businesses are closely tied to the
strength of the economy, such as banks or travel companies.
But Big Tech stocks have grown so big that their movements can mask what's
going on in the broad market. Five Big Tech stocks alone make up more than 21%
of the S&P 500 by market value, so weakness for tech can hold back S&P 500
index funds even if many stocks within it are rising.
All the big movements in the bond market have increased attention on the
Federal Reserve, whose chair said this week that he's noticed the recent climb
in yields. He disappointed some investors when he didn't offer anything more
forceful that could cap the rise. That has anticipation building for the Fed's
next policy meeting, a two-day session that ends March 17, and whether Powell
will offer any more guidance on what moves the Fed may make next.