Stocks rebounded Friday and clawed back much of their losses for the week after oil prices eased off their recent spurt. An update on inflation across the US that came in close to economists’ expectations also helped calm the market.
The Dow Jones Industrial Average was recently up 523 points, or 1%, and the Nasdaq composite was 1.3% higher. The blue-chip index had risen more than 600 points.
The S&P 500 gained 1.1% and was on track to break a four-day losing streak, its longest since June.
They got some help from a pullback in oil prices, which jumped earlier this week to their highest levels since May because of the ongoing war with Iran. The price for a barrel of Brent crude, the international standard, fell 3% to $104.42 after getting near $110 overnight.
That took some pressure off inflation, which remains far higher than anyone would like. A report on Friday showed that US consumers had to pay prices for gasoline, food and other costs of living that were 3.4% higher last month than a year earlier.
While inflation continues to be painfully high, Friday’s data came in close to what economists expected and traders were prepared for. It also firmed expectations on Wall Street that the Federal Reserve will feel compelled to hike its main interest rate at its meeting next week.
Such moves are the typical way the Fed tries to rein in high inflation, and they work by filtering through the bond market, making it more expensive for everyone to borrow money, slowing the economy and hopefully removing fuel for further inflation.
The rising expectations for rate hikes sent the yield of the two-year Treasury, which moves with guesses for upcoming Fed action, to 4.57% from 4.56% late Thursday.
Longer-term yields, though, actually eased. That could be an indication that investors in the bond market see upcoming hikes to rates by the Fed helping to keep control of inflation over the longer term.
The yield on the 10-year Treasury fell to 4.92% from 4.95% late Thursday.
Economists say hikes could quiet questions about the Fed’s commitment to keeping inflation under control. Worries had risen earlier in the summer about its credibility and whether it would do what’s needed to bring inflation down, even if it causes pain for the economy in the short term.
Federal Reserve Chairman Kevin Warsh has been adamant about not giving hints about where the Fed may take interest rates, though he did calm some concerns among investors at a speech late last month. President Trump, meanwhile, has been pushing for interest rates to go lower rather than higher.
“Symbolism can trump substance, even when it comes to monetary policy,” according to Brian Jacobsen, chief economic strategist at Annex Wealth Management.
It’s all coming at a moment when confidence among Americans continues to sour. A preliminary report from the University of Michigan on Friday said U.S. consumer sentiment is falling, with declines for both Democrats and Republicans.
Their expectations for inflation coming in the year ahead jumped to 4.6% from 4% last month. That’s the highest reading since June, and it’s concerning for the Fed and for economists because it can trigger a vicious cycle of behavior that only worsens inflation.
On Wall Street, Oracle climbed 2.6% after the tech giant reported stronger profit and revenue for the latest quarter than analysts expected.
Kroger rose 4.2% after the grocer reported a stronger profit for the latest quarter than analysts expected. It also held firm on its forecast for profit over the fiscal year, even though it trimmed its forecast for an important underlying measure of revenue growth.
ACV Auctions, whose digital marketplace connects wholesale buyers and sellers of vehicles, soared 44.3% after Copart said it would pay $10.50 in cash for each of the company’s shares.
