U.S. stocks closed higher after a comeback rally Friday helped pare some losses from earlier this week as concerns over persistent inflation and the resilience of the U.S. economy stirred up further volatility in recent sessions.
The S&P 500 rose 2.4%, while the Nasdaq jumped by over 3.8% in its best day since mid-March. The Dow added nearly 450 points. The sharp move higher came after Federal Reserve Chair Jerome Powell reaffirmed in an interview with Marketplace public radio on Thursday that two more 50 basis point rate hikes were on the table for the next two Fed meetings, and that officials were not "actively considering" a more aggressive 75 basis point hike. His comments echoed what other Fed officials also said this week.
Just a day earlier, the S&P 500 had closed within striking distance of a bear market, typically defined as a close of at least 20% from a recent record high. The index has declined by roughly 17% from its Jan. 3 record high through Friday's close and capped its sixth straight down week.
Treasury yields have spiked and then pared gains back this week, with the benchmark 10-year Treasury yield hovering around 2.9% Friday morning. Bitcoin prices recovered to trade above $30,000 after setting the lowest level since Dec. 2020, as a cratering in prices of Luna further reverberated across the broader cryptocurrency market.
The market gyrations this week coincided with two major inflation reports that came in hotter-than-expected. Thursday's Producer Price Index showed an 11% year-over-year rise in wholesale prices last month, with this rate moderating only slightly from March's all-time high rate of 11.5%. And the Consumer Price Index released earlier this week showed a still-elevated 8.3% annual increase in prices paid by consumers last month.
"Inflation has certainly become not only topical, but a real issue for the broader market, as the Fed has also increased its outlook for the number of [interest rate] hikes needed," Sonali Pier, managing director and portfolio manager at Pimco, told Yahoo Finance Live on Thursday. "In terms of the effect of inflation, it's really at this point, we're going to see if the Fed raising rates, unwinding some of the balance sheet, can take off some of that inflation froth. Because it's quite high, and it's starting to impact companies — from their ability to push through from a pricing power perspective, as well as consumers, whether that's at the gas pump or as a result of food increases and the like."
Other strategists agreed that the Fed's response to inflation — and how well the economy holds up as the Fed tightens financial conditions to address inflation — will be the key factor to watch going forward for the markets.
"We're in an environment right now where inflation is high. The labor market is very tight. The Fed wants to bring inflation down. They want to sort of cool the overheating in the labor market, which means their bias is to tighten financial conditions and try and slow growth," Jason Draho, UBS Head of Asset Allocation, said on Thursday. "In that environment, it's not great for any sort of financial assets."
"[Once] we get some sort of real break on inflation that people become much more comfortable that it's moderating, and moderating [to] a sustainable level that the Fed could be more comfortable, and they don't have to hike more aggressively ... I think that's the key catalyst," Draho said. "Unfortunately, that might take a few more months before the data starts to clearly show inflation is definitely below its peak, and the Fed could achieve its target two years out."
"So I think for the time being, it's definitely a choppy market," he added.
4:00 p.m. ET: S&P 500, Dow, and Nasdaq close higher following comeback rally
Here's where stocks were trading at the end of Friday's session:
S&P 500 (^GSPC): +93.78 (+2.39%) to 4,023.86
Dow (^DJI): +465.64 (+1.47%) to 32,195.94
Nasdaq (^IXIC): +434.04 (+3.82%) to 11,805.00
Crude (CL=F): +$4.13 (+3.89%) to $110.26 a barrel
Gold (GC=F): -$17.90 (-0.98%) to $1,806.70 per ounce
10-year Treasury (^TNX): +11.8 bps to yield 2.9350%
12:02 p.m. ET: Stocks extend gains, Nasdaq heads for best day since mid-March
Here were the main moves in markets as of 12:02 p.m. ET:
S&P 500 (^GSPC): +94.97 (+2.42%) to 4,025.05
Dow (^DJI): +469.85 (+1.48%) to 32,200.15
Nasdaq (^IXIC): +428.59 (+3.77%) to 11,799.55
Crude (CL=F): +$3.97 (+3.74%) to $110.10 a barrel
Gold (GC=F): -$16.80 (-0.92%) to $1,807.80 per ounce
10-year Treasury (^TNX): +8 bps to yield 2.8970%
11:00 a.m. ET: Amazon faces longest losing streak in 14 years amid tech sell-off
Amazon headed toward its longest losing streak since 2008, as shares of the e-commerce giant headed for a seventh straight weekly loss. Based on Thursday's closing prices, the stock was on track for a weekly loss of 6.8%, though it was poised to pare some of those losses amid Friday's rally.
Apple, likewise, has been dethroned as the world's most valuable company, with the market capitalization of Saudi Aramco overtaking that of the iPhone-maker this week. Apple shares have fallen by 19.7% year-to-date through Thursday's close, compared to the S&P 500's 17.5% drop over that period.
10:15 a.m. ET: Consumer sentiment drops to lowest level since 2011: University of Michigan
Consumer sentiment fell to a more than decade low in early May, according to the University of Michigan, as concerns around inflation persisted.
The University of Michigan's closely watched Surveys of Consumers index dropped to 59.1 in the preliminary May report, declining sharply from April's reading of 65.2. The latest reading marked the lowest since 2011.
The sentiment declines "were broad based — for current economic conditions as well as consumer expectations, and visible across income, age, education, geography, and political affiliation—continuing the general downward trend in sentiment over the past year," Joanne Hsu, director of the Surveys of Consumers, said in a press statement. "Consumers' assessment of their current financial situation relative to a year ago is at its lowest reading since 2013, with 36% of consumers attributing their negative assessment to inflation."
Consumers' inflation expectations remained elevated in May, with the survey showing one-year inflation expectations were unchanged at 5.4%. However, some strategists suggested the drop in risk assets over the past several weeks played an even larger role in the drop in the headline index.
"I would argue that the drop was largely a function of the plunge in stock prices. We know U. Mich is more sensitive to markets," Neil Dutta, head of economics at Renaissance Macro Research, wrote in an email Friday morning. "Inflation is an issue sure but the inflation expectations series were unchanged."
9:33 a.m. ET: Stocks open higher
Here were the main moves in markets as of 9:33 a.m. ET:
S&P 500 (^GSPC): +43.33 (+1.10%) to 3,973.41
Dow (^DJI): +241.55 (+0.76%) to 31,971.85
Nasdaq (^IXIC): +189.64 (+1.67%) to 11,560.61
Crude (CL=F): +$3.05 (+2.87%) to $109.18 a barrel
Gold (GC=F): -$24.60 (-1.35%) to $1,800.00 per ounce
10-year Treasury (^TNX): +9.8 bps to yield 2.9150%
7:54 a.m. ET: Tesla shares jump in early trading after Musk says Twitter deal on pause
Shares of Tesla (TSLA) jumped by more than 6% ahead of the opening bell Friday morning after CEO Elon Musk said his $44 billion plan to purchase Twitter (TWTR) was temporarily paused, pending more details over how much of Twitter's use base comprises bot accounts.
"Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users," Musk said in a Twitter post early Friday. He linked to a Reuters story suggesting Twitter filings showed fake or spam accounts made up fewer than 5% of the company's monetizable daily active users.
In announcing his deal to buy Twitter over the past month, Musk has suggested targeting bot accounts and authenticating users was one of his priorities for the company post-deal.
Twitter shares sank 11% in early trading to hover around $40 apiece.
7:45 a.m. ET Friday: Stock futures jump after Powell reaffirms 75 basis point rate hikes not currently under discussion
Here's where markets were trading ahead of the opening bell Friday morning:
S&P 500 futures (ES=F): +46 points (+1.17%) to 3,973.25
Dow futures (YM=F): +262.00 points (+0.83%) to 31,914.00
Nasdaq futures (NQ=F): +206.75 points (+1.73%) to 12,154.00
Crude (CL=F): +$1.79 (+1.69%) to $107.92 a barrel
Gold (GC=F): -$7.90 (-0.43%) to $1,816.70 per ounce
10-year Treasury (^TNX): +9.8 bps to yield 2.915%
6:10 p.m. ET Thursday: Stocks open lower
Here's where markets were trading Thursday evening:
S&P 500 futures (ES=F): -10 points (-0.25%) to 3,917.25
Dow futures (YM=F): -73 points (-0.23%) to 31,579.00
Nasdaq futures (NQ=F): -41 points (-0.34%) to 11,906.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.