Stocks Close Higher to Finish Strong Week

The Dow Jones Industrial Average shot to its best three-week period since November 2020, boosted by the prospect of a slower pace of rate hikes and the latest streak of corporate earnings.

Major indices started declines on Friday before moving higher and ended the session near their highs for the day. The Dow added 748.97 points or 2.5% to 31082.56. The S&P 500 added 86.97 points or 2.4% to 3752.75. The tech-focused Nasdaq Composite added 244.87 points, or 2.3%, to 10859.72.

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All three major indices ended with weekly gains of at least 4.7%, a reprieve after an extended period of volatility marked by wide swings for stocks and bonds around the world. The Dow and S&P 500 closed their best weeks since June, while the Nasdaq closed with its best week since July.

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Major indices moved higher and government bond yields paused their climb as The Wall Street Journal reported that Federal Reserve officials plan to raise interest rates by 0.75 percentage points during their Nov. 1-2 meeting, but are poised to debate shifting to a smaller increase in December .

The way markets typically function is that when demand rises, prices rise, and that motivates producers to increase supply. Dion Rabouin of WSJ explains why the age-old economic equation of supply and demand doesn’t work right now. Illustration: David Fang

Concerns about the pace of rate hikes – and whether they will help push the US into recession – have led to a sharp sell-off throughout the year.

“I think we’re in the final innings of the peak of Fed rage,” said Christian Hoffmann, a portfolio manager at Thornburg Investment Management who oversees bonds.

The 10-year Treasury yield fell on Friday but climbed for the 12th consecutive week to record the largest gain on such a trajectory since 1987. The benchmark yield ended the week at 4.212%, near the highest level of the past decade.

Two-year Treasury yields, which tend to be more sensitive to interest rate expectations, also fell Friday, ending the week at 4.489%.

Investors have been watching earnings closely for clues as to how rising rates, a strong dollar and high inflation are affecting corporate earnings. Third quarter results have been a mixed bag so far. US banks earlier this week helped boost markets with better-than-expected results, but cracks are visible elsewhere. So far, the net profit margin of S&P 500 companies in the third quarter will decline for the fifth straight period.

Snap shares fell $3.03, or 28%, to $7.76 after the company reported a further slowdown in revenue growth and indicated that the digital advertising market could remain weak for some time.

“The reality is that we are seeing weak growth, higher inflation and earnings that are surprising on the downside. It’s a pretty tough combination,” said Luca Paolini, chief strategist at Pictet Asset Management. “This results season is going to be good. The concern is in a sense for the next two.”

Twitter shares fell $2.55, or 4.9%, to $49.89 after Bloomberg News reported that officials from the Biden administration are discussing whether the US should subject some of Elon Musk’s companies to national security assessments.

Still, the week has been littered with several signs that the US economy is stronger than many initially feared. Several business leaders — from those at JPMorgan Chase to Delta Air Lines — have expressed confidence that consumers will remain strong. And new data from Thursday showed that the job market is still healthy.

In the UK, markets came under pressure on Friday as investors wondered who will win the race to become the country’s next prime minister after Liz Truss resigns on Thursday.

Her election and resignation led to sharp swings in the country’s currency and bonds. UK 10-year Treasury yields rose to around 4.05%, from 3.860% on Thursday. Bond yields rise when prices fall.

Traders worked on the floor of the New York Stock Exchange earlier this week.


Photo:

Michael M. Santiago/Getty Images

The UK’s FTSE 100 index rose 0.4%. The pan-European Stoxx Europe 600 fell 0.6%

Oil prices rose on the commodity markets. Brent oil, the international benchmark, gained $1.12 or 1.2% a barrel to settle at $93.50.

Asian stocks were mixed. China’s benchmark Shanghai Composite rose 0.1%, while Hong Kong’s Hang Seng fell 0.4% and Japan’s Nikkei 225 index lost 0.4%.

Write to Gunjan Banerji at [email protected] and Chelsey Dulaney at [email protected]

Corrections & Reinforcements
Christian Hoffmann is a portfolio manager at Thornburg Investment Management. In an earlier version of this article, his last name as Hoffman was misspelled. (Corrected on October 21)

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