Stock market has best day in 2 weeks

A tough week on Wall Street dominated by concerns about a weakening economy ended Friday with a broad rally that gave the market its best day in two weeks.

The S&P 500 rose 1.9%. Despite the gains, the benchmark index still ended with its first weekly loss in three years. The Dow Jones Industrial Average rose 1% and the Nasdaq composite rose 2.7%.

Technology and communications services stocks powered several gains as investors cheered a big quarterly increase in Netflix subscriptions. The comments from a Federal Reserve official also helped build hope among investors that the central bank may decide to slow the pace of interest rate hikes next month.

Major indexes started the week in the red, largely due to concerns that the economy might not be able to avoid a bruising recession. Many reports on the economy were weaker than expected, as the full weight of the Federal Reserve’s interest rate hikes last year began to weigh on the system.

Not long ago, bad news about the economy was usually bad news for Wall Street. For investors, this means the Fed may ease up on rate hikes. But bad news about the economy is increasingly bad news for Wall Street, which is more concerned about the prospects of a serious recession.

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To make things more complicated, several Fed officials signaled during the week that they would likely raise rates further and then keep them there for a while to ensure that the nation’s high inflation is indeed contained. Although inflation has begun to moderate, upward pressure remains due to the still-tight US labor market and other factors.

Many investors on Wall Street this week already predicted a small or short-term recession, but they also hoped that a rate cut by the Fed later this year would mean a rebound for the markets. This week’s economic data and comments from central banks threaten such risks.

But on Friday, Fed Governor Christopher Waller said he favors a quarter point hike on February 1, when the central bank issues its next interest rate policy update. Waller also said rates are already too high to slow the economy. The comments could help calm rate hike concerns in the market.

“It’s important when you hear members of the Federal Reserve agree to that,” said Quincy Krosby, chief strategist at LPL Financial.

Gains for technology-led stocks were a big part of Friday’s S&P 500 rally. Google’s parent company said it was cutting costs by cutting 12,000 jobs, and Netflix reported an increase in subscribers.

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Netflix’s surprise report late Thursday helped set the stage for Friday’s rally as markets worried the streaming service’s latest results would disappoint and add to concerns about weaker earnings overall, said Jay Hatfield, CEO of Infrastructure Capital Advisors.

“When they started rocketing, that’s when the whole Nasdaq started moving, and it was moving the S&P and everything else,” Hatfield said.

Alphabet rose 5.3% after becoming the latest Big Tech company to admit it had expanded too quickly in recent years amid a boom created by the pandemic. Netflix rose 8.5%.

Cruise lines also made gains. Carnival was up 3.5%, Norwegian Cruise Lines was up 4.5% and Royal Caribbean was up 3.6%.

Also affecting the market on Friday: the expiration of $797 billion in stock option contracts. That’s the largest amount for a single stock option and the fourth largest since January 2022, according to Goldman Sachs.

Treasury yields were mostly up, retreating from earlier in the week on concerns about a weakening economy. The yield on the 10-year Treasury, which helps set rates for mortgages and other major debt, rose to 3.48% from 3.40% late on Thursday.

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The two-year yield, which closely tracks expectations for Fed action, rose to 4.13% from 4.19%.

All told, the S&P 500 rose 73.76 points to 3,972.61. The Dow gained 330.93 points to 33,375.49. The Nasdaq gained 288.17 points and closed at 11,140.43.

Small-cap companies also made solid gains. The Russell 2000 index rose 30.99 points, or 1.7%, to end at 1,867.34.

Stock markets abroad made mostly modest gains.

The Nikkei 225 added 0.6 percent after Japan reported that consumer inflation rose to 4 percent in December, the highest level in 41 years. Higher readings may increase pressure on the Bank of Japan to change its long-term policy of keeping its key interest rate at a low-0.1% level. But economists expect price pressures to ease in the coming months as inflation eases elsewhere.

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