U.S. Stocks Extend Recovery, Snap Three-Week Losing Streak

Stocks moved sharply higher over the course of the trading session on Friday, extending the notable rebound seen on Wednesday and Thursday. With the continued upward move, the major averages snapped a three-week losing streak.

The major averages pulled back off their highs of the session going into the close but held on to strong gains. The Dow jumped 377.19 points or 1.2 percent to 32,151.71, the Nasdaq surged 250.18 points or 2.1 percent to 12,112.31 and the S&P 500 shot up 61.18 points or 1.5 percent to 4,067.36.

For the holiday-shortened week, the Dow spiked by 2.7 percent, while the S&P 500 and the Nasdaq soared by 3.6 percent and 4.1 percent, respectively.

Stocks continued to benefit from bargain hunting, as the major averages extended the recovery from their worst levels in over a month.

Traders seem to be coming to terms with the likelihood of another 75 basis point interest rate hike by the Federal Reserve later this month.

Worries about the impact of the Fed’s aggressive interest rate hike strategy may continue to lead to some trepidation, but many feel higher rates have been priced into the markets following recent weakness.

“Wall Street is finishing the week on a positive note as the dollar’s rally has run out of steam as optimism grows for inflation to continue to come down,” said Edward Moya, senior market analyst at OANDA.

He added, “Economists are slightly lowering their inflation forecasts and that could mean the Fed won’t have to take rates above 4%.”

Steel stocks showed a substantial move to the upside over the course of the session, resulting in a 5 percent spike by the NYSE Arca Steel Index.

Significant strength was also visible among oil service stocks, as reflected by the 4.4 percent surge by the Philadelphia Oil Service Index.

The rally by oil service stocks came amid a sharp increase by the price of crude oil, with crude for October delivery jumping $3.25 to $86.79 a barrel.

Gold stocks also saw considerable strength amid an increase by the price of the precious metal, driving the NYSE Arca Gold Bugs Index up by 2.9 percent.

Computer hardware, airline and semiconductor stocks also showed notable moves to the upside amid broad based buying interest.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index rose by 0.5 percent, while Hong Kong’s Hang Seng Index spiked by 2.7 percent.

The major European markets also showed strong moves to the upside on the day. While the U.K.’s FTSE 100 Index jumped by 1.2 percent, the French CAC 40 Index and the German DAX Index both surged by 1.4 percent.

In the bond market, treasuries showed a lack of direction over the course of the session before closing modestly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.9 basis points to 3.321 percent.

Looking Ahead

Reports on consumer and producer price inflation are likely to be in focus next week, as the data could impact expectations regarding future interest rate hikes. Retail sales, industrial production and consumer sentiment data is also likely to attract attention.

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