U.S. stocks opened higher on Friday, with major indices on track to extend a recent stretch of gains and break a punishing streak of losses.
The S&P 500 rose 0.8% shortly after the opening bell. The Dow Jones Industrial Average rose 48 points, or 0.1%, and the Nasdaq Composite was up 1.4%. On Thursday, stocks rose and pushed the Dow to its fifth consecutive daily gain.
The top three indices headed into Friday’s session with solid gains for the week, a sharp reversal of a tiring stretch of weekly losses. Last week, the Dow fell for the eighth consecutive week, its longest streak since 1932, while the S&P 500 and Nasdaq Composite recorded seven weeks of losses. This week, however, all three indices are up 3.4% or more, according to Thursday’s close. The Dow has led gains for the week, up 4.4%, on track for its first gain since March.
Few investors and strategists are willing to fund a sale that has caused the benchmark S&P 500 to fall 15% during the year. Still, many said this week’s earnings have provided relief from what appeared to be an almost constant abuse of portfolios. Many pointed to this week’s strong gains as a reason for optimism, with stores like Macy’s and Dollar Tree posting strong sales increases. A strong sell-off of some stocks has made the valuations more attractive, encouraging some investors to come in and buy the downside.
On Friday, investors found good news in a new round of data, which showed that Americans increased spending by 0.9% in April over the previous month, exceeding expectations. Meanwhile, a close-up reading of US inflation moderated in April. Shares rose ahead of the market after the figures were released.
However, some of the key factors that have plagued stocks this year have changed. The Federal Reserve is still on the verge of continuing to raise interest rates aggressively this year to combat rising inflation, raising concerns that stocks will end the US economy in a recession. Meanwhile, Covid-19 blockades in China and the war in Ukraine have aggravated supply chain thicknesses. For several weeks, investors have also been digesting disappointing earnings results and data that add to a darker picture of the economy.
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“We are still of the opinion that we are only seeing a short-term uptrend,” said Florian Ielpo, macro head of Lombard Odier Investment Managers, noting that the firm’s flagship multi-asset portfolio is close to 60% cash.
However, he noted that the recent bearish position between professional and individual investors suggests that the current upswing could be further extended, as sentiment is often seen as the opposite indicator.
Nearly 54 percent of individual investors expect shares to fall over the next six months, according to a survey by the American Association of Individual Investors during the week through Wednesday, slightly more than the previous week. Meanwhile, a May survey by BoA Global Research showed that cash levels among global fund managers had risen to their highest levels since the September 11, 2001 attacks in the United States.
Despite doubts about the long-term sustainability of this week’s rally, many investors say some stocks and sectors have become more attractive as valuations have fallen. Nearly $ 21 billion flowed into global equity funds during the week to Wednesday, shows a BofA Global Research analysis of EPFR data, the largest entry in 10 weeks.
Seema Shah, chief strategist at Principal Global Investors, said his company has spotted buying opportunities in small-cap stocks, consumer commodities and profitable technology companies that have continued to see an increase in value and use.
“At this stage it’s very important for investors to go back to the market and look at the strength of a company before they set foot again,” Shah said. “As we approach an economic downturn, we expect that some companies – those that are heavily leveraged and do not have such solid balance sheets or stable earnings prospects – will be under significant pressure.”
Shares of Dell Technologies rose 15% after reporting an increase in earnings and a decrease in some operating expenses. Ulta Beauty was up 10.2% after the retailer raised its year-over-year sales and earnings target after better-than-expected first-quarter results.
Gap shares fell 13% after the retailer suffered a loss amid a drop in net sales. Shares of the software company in the human resources cloud Workday fell 7.2% after reporting adjusted first-quarter earnings that did not live up to expectations.
In Friday’s bond market, the U.S. Treasury’s 10-year benchmark yield fell to 2.739% from 2.756% on Thursday. Yields and prices are moving in opposite directions.
The price of oil fell, with Brent crude, the international benchmark, falling 0.2% to $ 113.94 a barrel.
The dollar lost ground again. The WSJ dollar index, which measures the dollar against a 16-currency basket, fell 0.1%, extending a recent stretch of losses amid concerns that the dollar has risen in price relative to its basket. fundamental. The Russian ruble fell 1.1% against the dollar, and also extended its falls to another day after the country’s central bank cut interest rates.
Wall Street stock indexes rose on Thursday.
Photo: David L. Nemec / Associated Press
Abroad, the pan-continental Stoxx Europe 600 added 1%. In Asia, Hong Kong’s Hang Seng rose 2.9%, led by Alibaba’s shares, which rose 12% after posting gains that exceeded analysts ’expectations. Japan’s Nikkei 225 added 0.7%. Shanghai Composite gained 0.2%.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com
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