On Friday, Wall Street rallied, headed by corporations that stand to benefit the most from a stronger economy, but not enough to prevent the stock market from having its worst week since the winter.
Following another bumpy day of trading, the S&P 500 gained 49.50, or 1.1 percent, to 4,357.04. Throughout the day, it fluctuated between a loss of 0.4 percent and a gain of 1.6 percent.
The Dow Jones Industrial Average rose 482.54 points, or 1.4 percent, to 34,326.46, while the Nasdaq composite increased 118.12 points, or 0.8 percent, to 14,566.70.
Merck led the market up by 8.4% after reporting that its experimental COVID-19 treatment tablet reduced hospitalizations and fatalities by half. The prospect of a new instrument to combat the pandemic boosted airl’s stock.
United Airlines increased by 7.9%, Caesars Entertainment increased by 6.4 percent, and Live Nation Entertainment increased by 8.3%.
Energy producers, financial firms, and other sectors whose revenues are often dependent on the health of the economy were also leading the charge.
The market’s recent gains were insufficient to compensate for the previous few days’ poor performance. Even still, the S&P 500 had its lowest week since February, losing 2.2 percent. A sharp increase in interest rates earlier this week shook the market and spurred a rethinking of whether stocks, particularly the most popular ones, had become overvalued.
The yield on the 10-year Treasury dipped to 1.46 percent on Friday, down from 1.52 percent late Thursday. That’s still a lot higher than the 1.32 percent it was a week and a half ago.
September was also the S&P 500’s weakest month since March 2020, when markets plummeted as COVID-19 shutdowns took place. The following are some of the concerns that have weighed on the market: The Federal Reserve is on the verge of removing its market-beating stimulus, economic data has recently been mixed following an increase in COVID-19 infections, corporate tax rates may be set to climb, and political turbulence in Washington persists.
In addition, the world is still engulfed in excessive inflation. Oil prices increased by around 2% this week, approaching a seven-year high, while natural gas prices increased by almost 7%.
High inflation, according to the Federal Reserve, is merely temporary and is the result of the economy roaring back to life after its earlier halt. However, if it is incorrect, the Fed may be forced to raise interest rates sooner or more forcefully than expected by markets.
On Friday, economic news were mixed. Manufacturing in the United States rose faster than predicted last month, although the Federal Reserve’s preferred gauge of inflation was somewhat higher than expected in August. They come after a dismal report on Thursday, which revealed that more people registered for jobless benefits than projected.
According to Rich Weiss, chief investment officer of multi-asset strategies at American Century Investments, “you hear the word’stagflation’ come up once in a while, which would be the worst outcome.”
When economic growth slows while inflation stays high, this is referred to as stagflation. Weiss doesn’t expect that to happen, as long as the virus doesn’t create further global shutdowns, but he’s also not placing his assets as if he thinks equities will continue to rise sharply in the future.
“Right now, we’re not swinging at the pitch,” he explained. “We are apolitical.”
Weiss believes the market needs to fall by nearly a third before he considers stocks to be reasonably valued, based on current interest rates.
Despite Japan’s lifting of a pandemic state of emergency and a survey of large Japanese manufacturers showing morale at a nearly three-year high, Asian stock markets slumped earlier in the day.
The Nikkei 225 index in Japan plummeted 2.3 percent, while the Kospi in South Korea fell 1.6 percent.
European stock indices have also dropped.