Stocks experienced a significant upswing on Friday, with the major indices successfully recouping the losses from the previous session. The Dow closed at its highest level in a month, marking a strong performance. Although the indices slightly retreated from their peak levels by the end of the session, they stayed robustly positive. The Nasdaq leaped by 291.91 points, representing a 1.5% increase, to close at 19,630.20, while the S&P 500 advanced by 59.32 points, or 1.0%, reaching 5,996.66. Meanwhile, the Dow rose by 334.70 points, or 0.8%, settling at 43,487.83.
Throughout the week, the major averages recorded substantial gains, with the Dow climbing 3.7%, the S&P 500 increasing by 2.9%, and the Nasdaq rising by 2.5%. Contributing to these gains was a decline in treasury yields, despite the fact that the yield on the ten-year note rebounded from an early dip to finish nearly unchanged.
The recent drop in treasury yields was buoyed by U.S. inflation data released in recent days, which renewed optimism regarding the outlook for interest rates. Adding to this optimism, Federal Reserve Governor Christopher Waller expressed to CNBC that the Fed might lower interest rates multiple times within the year if inflation decreases as anticipated.
"As long as the data continues to reflect favorable trends in inflation, I could easily see rate cuts happening sooner than what the markets are currently expecting," Waller remarked during an interview with CNBC's Sara Eisen on "Squawk on the Street" on Thursday. He indicated that the frequency of rate cuts would be data-driven, suggesting the potential for three or four cuts with significant inflation progress or just one or two if the decrease is less pronounced.
Wall Street's vigor may also be attributed to a positive outlook regarding market conditions under President-elect Donald Trump, who is set to be sworn in again on Monday. Stocks have rallied since Trump’s November election, driven by expectations of favorable business policies, despite concerns about proposed tariffs.
In economic news from the U.S., the Federal Reserve unveiled a report showing a more substantial-than-expected increase in industrial production for December, rising by 0.9% following a revised 0.2% rise in November. Analysts had predicted a 0.3% increase, up from the initially reported 0.1% decline for the previous month.
**Sector Insights**
Semiconductor stocks had a standout day, pushing the Philadelphia Semiconductor Index up by 2.8%. Applied Materials (AMAT) saw significant gains after KeyBanc Capital Markets upgraded its rating on the company's stock from Sector Weight to Overweight. Retail stocks also showed strength, as indicated by a 1.5% increase in the Dow Jones U.S. Retail Index. Banking, brokerage, and software stocks performed well, although pharmaceutical stocks experienced notable declines.
**International Markets**
Internationally, the Asia-Pacific markets displayed mixed results on Friday. Japan's Nikkei 225 Index decreased by 0.3%, while China's Shanghai Composite Index edged up by 0.2%. In contrast, major European markets demonstrated strong upward movements, with the U.K.'s FTSE 100 Index advancing by 1.4%, Germany's DAX Index increasing by 1.2%, and France's CAC 40 Index by 1.0%.
In the bond market, treasuries retreated near the unchanged line after showing initial strength, with the yield on the ten-year note, which moves inversely to its price, edging up by less than a basis point to 4.609%, after reaching a low of 4.568%.
**Looking Ahead**
Following Martin Luther King Jr. Day on Monday, trading in the coming week may be influenced by reactions to the latest earnings reports amid a relatively sparse U.S. economic calendar. Notable companies scheduled to announce their quarterly results include 3M (MMM), Netflix (NFLX), Procter & Gamble (PG), Johnson & Johnson (JNJ), Travelers (TRV), American Express (AXP), and Verizon (VZ). Additionally, any major policy actions by the new Trump administration after the inauguration could impact next week’s market activity.
The material has been provided by InstaForex Company - www.instaforex.com
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