U.S. stock benchmarks closed mostly higher Friday, following choppy trade, after oil prices rebounded on the back of reports of a missile strike on a Saudi Aramco facility and as investors continued to weigh rising interest rates.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite each booked a second straight week of gains, as investors largely looked past the Russia-Ukraine war to increasingly hawkish commentary from Federal Reserve officials.
How did stock indexes perform?
- The Dow Jones Industrial Average DJIA,
+0.44%rose 153.30 points, or 0.4%, to close at 34,861.24.
- The S&P 500 SPX,
+0.51%advanced 22.90 points, or 0.5%, to finish at 4,543.06.
- The Nasdaq Composite COMP,
-0.16%fell 22.54 points, or 0.2%, to end at 14,169.30.
On Thursday, the Dow Jones Industrial Average rose nearly 350 points, or 1%, while the S&P 500 gained 1.4% and the Nasdaq Composite climbed 1.9%.
For the week, the Dow booked a gain of 0.3% , the S&P 500 rose 1.8% and the Nasdaq advanced 2%.
What drove the markets?
U.S. stocks indexes ended a choppy trading session Friday with mixed results after oil futures turned higher following news reports that a missile strike had caused an explosion and fire at a Saudi Aramco facility in Jeddah. Yemen’s Iran-backed Houthi rebels have claimed credit for past strikes on Saudi facilities.
Meanwhile, the Federal Reserve’s monetary policy and the Russia-Ukraine war remained in focus for investors.
“Investors are readjusting their sights for how high interest rates must go and how fast those rates must rise in order to reduce the inflation pressure,” according to James Solloway, chief market strategist and senior portfolio manager at SEI Investments Co.
The Russia-Ukraine war has been “a major shock” that risks making the problem of inflation “even more intense” before the surge in cost of living starts to come back down, said Solloway, in a phone interview Friday. “Even if peace breaks out tomorrow,” he said that shortages of energy, food and metals will remain a concern as Russia will continue to be “isolated” from the West.
“Investors should expect more volatility and a very mixed equity performance,” said Solloway. “The specter of stagflation is beginning to rise.”
Information technology SP500EW.45,
Rising yields are “bringing back concern about valuations among those more expensive stocks in the market,” said Jeff Kleintop, chief global investment strategist at Charles Schwab, in a phone interview Friday. “Financials, energy and more cyclical parts of the market are doing well,” he said. The S&P 500’s financials sector SP500EW.40,
Meanwhile, something “unusual” has happened in the stock market lately, according to Kleintop. He said that financial conditions have eased since initially tightening on the Russia-Ukraine war, “even though the Fed is talking up being more hawkish.” While that has helped to lift the stock market, the recent rally is probably “limited,” in his view, as financial conditions “ultimately” will tighten again should the Fed continue its “hawkish messaging.”
“Investor bias remains toward larger safer stocks with the biggest, Apple AAPL,
“The focus going forward will be with companies demonstrating pricing power in the next round of earnings as inflation and resulting higher interest rates will remain the biggest concern,” he said.
Investors and economists have penciled in more aggressive interest rate increases by the Federal Reserve after Chairman Jerome Powell earlier this week said the central bank could lift rates by more than 25 basis points, or a quarter of a percentage point, in future meetings, while some policy makers have argued for half-point increases.
New York Fed President John Williams on Friday said he would support a half-point move if justified but indicated it was premature to make a call on the size of a future rate increase. Citigroup C in a note Friday saw the Fed raising interest rates in four straight half percentage point moves and then hiking into 2023, sending the benchmark rate to a range of 3.5% to 3.75%.
In U.S. economic data Friday, the final reading of the University of Michigan’s consumer sentiment in March fell slightly to 59.4 and stayed at a nearly 11-year low because of high inflation and angst about the Russian invasion of Ukraine.
“Consumer sentiment has been hurt because of inflation more than anything else,” said SEI’s Solloway. “People don’t like it when they see prices at the gas pump jumping” or prices at the grocery store that are “materially higher” compared to just a few months ago, he said.
In other U.S. economic data, pending home sales slid 4.1% in February, according to the National Association of Realtors on Friday. That’s the lowest level in nearly two years.
Elsewhere, the European Council and European Parliament reached a provisional agreement on a Digital Markets Act, aimed at tech giants such as Google parent Alphabet Inc. GOOGL,
Which companies were in focus?
- JD.com Inc. JD,
-2.60%shares fell 2.6% after the U.S. Public Company Accounting Oversight Board said it was premature to say it was close to an agreement with China on allowing audit inspections of U.S.-listed Chinese companies. Alibaba Group Holding BABA shares slid 1.9%, following a fall of around 6% in Hong Kong.
- NIO Inc. NIO,
-9.42%shares dropped 9.4% after the Chinese electric-vehicle maker posted better-than-forecast revenue in the fourth quarter, but disappointed with its deliveries forecast.
- Bed Bath & Beyond Inc. BBBY,
+2.22%shares rose 2.2%, after the home goods retailer announced a “cooperation agreement” with activist investor Ryan Cohen and RC Ventures LLC.
How did other assets fare?
- The yield on the 10-year Treasury note TMUBMUSD10Y,
2.478%jumped about 15.1 basis points to 2.491%, the highest since May 6, 2019 based on 3 pm Eastern Trading levels, according to Dow Jones Market Data. Treasury yields and prices move in opposite directions.
- The ICE U.S. Dollar Index DXY,
+0.02%, a measure of the currency against a basket of six major rivals, was fractionally higher Friday and showed a weekly gain of 0.6%.
- Bitcoin BTCUSD,
-0.20%was trading 1.3% higher at around $44,485.
- In oil futures, West Texas Intermediate crude for May delivery CLK22,
+0.25%rose 1.4% Friday to settle at $113.90 a barrel. For the week, prices for the front-month contract climbed 10.5%, according to Dow Jones Market Data.
- Gold for April delivery GCJ22,
-0.23%fell 0.4% to settle at $1,954.20 an ounce. But the precious metal still saw a weekly rise of 1.3% based on prices of the most-active contract, according to Dow Jones Market Data.
- In European equities, the Stoxx Europe 600 SXXP,
+0.11%closed 0.1% higher Friday and booked a weekly decline of 0.2%. London’s FTSE 100 UKX, +0.21%gained 0.2% Friday for a weekly advance of 1.1%.
- In Asia, the Shanghai Composite SHCOMP,
-1.17%closed 1.2% lower Friday for a weekly decline of 1.2%. The Hang Seng Index HSI, -2.47%dropped 2.5% Friday, booking a weekly decline of less than 0.1%. Japan’s Nikkei 225 NIK, +0.14%rose 0.1% Friday, bringing its weekly gain to 4.9%.
—Barbara Kollmeyer contributed to this report.