U.S. stocks rose sharply Friday, more than erasing the loss seen the previous session in the aftermath of a poor Treasury bond auction and fresh signs that interest rates may stay higher for longer.
The Dow Jones Industrial Average
rose 272 points, or 0.8%, to 34,164.
The S&P 500
was up 50 points, or 1.2%, to 4,398.
The Nasdaq Composite
advanced 222 points, or 1.6%, to 13,743.
On Thursday, the Dow industrials fell for a second day, dropping around 220 points, or 0.7%, while the S&P 500 ended an eight-day winning streak and the Nasdaq Composite snapped a run of nine straight gains.
Stocks bounced back into positive territory for the week on Friday.
“Bulls are focused on healthy macro data, improving seasonality, and extremely pessimistic sentiment and positioning, while bears argue that Fed policy remains uncertain, recession indicators continue to flash, and consumer data is beginning to suggest a slowdown,” said Mark Hackett, chief of investment research at Nationwide.
“Earnings revisions further complicate this debate, with fourth-quarter estimates being revised lower but 2024 estimates remaining resilient,” he said.
The S&P 500 and Nasdaq Composite ended their longest winning streaks since November 2021 on Thursday, after a poorly-received $24 billion sale of 30-year Treasury bonds.
Treasury bond yields were easier on Friday. The yield on the 30-year Treasury bond
fell 4.1 basis points to 4.734%, after it nearly notched its biggest one-day jump since June 2022.
It was unclear whether the Treasury auction had been affected by a reported ransomware attack against the U.S. unit of the Industrial & Commercial Bank of China that apparently disrupted the U.S. Treasury market.
See: How ransomware attack on ICBC rattled the Treasury market and shook up a 30-year bond auction
Investors were also rethinking the recent debt market rally fueled by hopes that the Federal Reserve’s interest-rate hiking cycle was finishing. Driving angst were comments from Federal Reserve Chairman Jerome Powell, who told an International Monetary Fund panel on Thursday that the central bank was wary of “head fakes” from inflation, and the “2% goal was not assured.”
Much of Powell’s language was nearly identical to remarks he made on Nov. 1, when investors rallied stocks and bonds after the Fed chair didn’t explicitly commit to a further interest rate hike. But the subsequent rally for stocks after the Nov. 1 Fed meeting, with the S&P 500 jumping more than 6% over eight days, and a 50 basis point drop in the 10-year Treasury yield were “overdone and not governed by facts,” said Tom Essaye, founder of Sevens Report Research, in a note.
“Meanwhile, if we think about what the Fed said last week, namely that the rise in the 10-year yield was doing the Fed’s work for it and as a result they may not have to hike rates, then the short/sharp decline in the 10-year yield we’ve seen could essentially remove the reason for the Fed not having to hike rates — and that could put a rate hike back on the table!” he wrote. “That’s essentially what Powell reminded us of yesterday and that, along with the poor Treasury auction, pushed yields higher,” setting up pressure on stocks.
Consumer sentiment fell in November for the fourth month in a row due to worries about higher interest rates as well as war in the Middle East. The preliminary reading of the sentiment survey declined to 60.4 from 63.8 in October, the University of Michigan said Friday. It’s the weakest reading since May.
Investors were also tuning into more comments by Fed officials Friday, including San Francisco Fed President Mary Daly, who said she didn’t know if rates were high enough to bring inflation back down to the central bank’s 2% target.
Companies in focus
Shares of Plug Power Inc.
dropped 43.5% after the fuel-cell company missed analysts expectations and said its performance had suffered due to “unprecedented supply challenges.”
Trade Desk Inc.
shares fell 16.7% after the advertising technology company’s guidance fell short of expectations.
shares dropped 10.6% after the maker of DNA-sequencing technology cut its full-year sales and profit outlook.
Lions Gate Entertainment Corp.
shares were up 0.4% after the TV, film and media giant reported a surprise second-quarter profit, and stuck with its full-year outlook “even with the negative impact of the strike” by Hollywood’s writers and actors earlier this year.
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