US stocks rose on Friday, with the S&P 500 building on its rally into records as investors bet that higher inflation will be temporary as the economy continues to recover from the pandemic.
The broad equity benchmark rose by 0.3% and reached another record high at 4,280.70 at the end. Financials were the best-performing sector in the S&P 500, up 1.3%. The Dow Jones Industrial Average rose 237.02 points, or 0.7%, to 34,433.84, less than 2% from its record high . The Nasdaq Composite canceled previous gains and closed 0.1% lower at 14,360.39 amid a spike in bond yields. The 10-year government bond yield rose 4 basis points to 1.52%.
The S&P 500 gained 2.7% over the course of the week and posted its biggest weekly gain since early February. The Dow rose 3.4% this week, making it its best week since mid-March, while the Nasdaq rose 2.4%.
Friday’s rally came after a key inflation indicator the Federal Reserve uses to set policy rose 3.4% in May, the fastest increase since the early 1990s, the Department of Commerce reported on Friday. The measured value met the expectations of the economists surveyed by Dow Jones. The core index rose 0.5% during the month, which was actually below the estimate of 0.6%.
The rise in the core price of consumer spending reflects the rapid pace of economic expansion and the resulting price pressures, and reinforces how far the nation has come since the 2020 pandemic shutdown.
“This supported the Fed’s argument that inflation is temporary and will help allay fears that we are witnessing uncontrolled inflation,” said Anu Gaggar, senior global investment analyst for the Commonwealth Financial Network. “This should continue to support risk assets like stocks.”
Bank stocks rose after the Federal Reserve announced that the banking sector could easily weather a severe recession. The Fed announced when it released the results of its annual stress test that the 23 institutions in the 2021 test had remained “well above” the minimum capital requirement during a hypothetical economic downturn. The decision paved the way for banks to increase dividends and buy back more shares that were suspended during the pandemic.
Wells Fargo was up 2.6% while Fifth Third and PNC were all up over 2%. JPMorgan and Bank of America both gained more than 1%.
Nike stock rose 15.5%, which boosted sentiment for the Dow. The company reported profits and revenues that exceeded Wall Street estimates. Digital sales have also increased 41% since last year and 147% over two years ago.
FedEx, on the flip side, was down 3.6% despite outperforming in earnings and earnings. FedEx also gave a strong outlook for the year.
Trading volume spiked on Friday as FTSE Russell wanted to rebalance its US stock indices at close of the market. Bank of America estimates that a total of 625 changes to the Russell indices, including the Russell 1000 and Russell 2000, would switch hands more than $ 170 billion worth of stocks.
President Joe Biden announced Thursday that the White House had signed an infrastructure deal with a non-partisan group of senators. Legislators have worked for weeks to put together a roughly $ 1 trillion package that could get through Congress with the support of both parties. Among other things, the framework provides for new spending of 579 billion US dollars for transport such as roads, bridges and rail, the infrastructure for electric vehicles and electric mass transit.
The stock market bounced back from last week’s swoon caused by worries about a more restrictive Federal Reserve. Last week the Dow fell 3.5% and the S&P 500 lost 1.9% as the Fed raised its rate hike schedule.
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