Stocks jumped on Friday as global markets were poised to end the week with a gain, a relatively rare development during a tumultuous time for Wall Street.
The S&P 500 rose more than 2 percent in early trading, building on a 1 percent gain the day before. The index is poised to record only its second weekly gain in the past 12 weeks.
Stocks turned markedly higher after a University of Michigan survey of consumers found that inflation expectations for five years from now jumped to 3.1 percent in May, matching the highest level since 2011. But that number was revised down on Friday from a more pronounced pickup reported in preliminary data earlier this month — a pop that had unsettled Federal Reserve officials and helped to motivate their decision to raise rates by three-quarters of a percentage point in May.
The Fed may take comfort in the knowledge that inflation expectations, while high, are not surging as much as they had believed. The revision could take pressure off Fed policymakers, who are contemplating whether to raise rates by half a point or three-quarters of a point at their meeting in July.
Even after recent gains, so far this year the S&P 500 is down nearly 20 percent, which would be the worst first-half performance since 1970. Investors pulled more than $17 billion from U.S. stock funds this week, according to Bank of America, the first outflow in seven weeks. Still, for the year, investors have added nearly $120 billion to U.S. stock funds.
The clearest sign of “capitulation” among investors fed up with falling markets has been in the bond market, Bank of America noted, with some $190 billion being withdrawn from bond funds so far this year. As the Fed raises interest rates to fight inflation, Treasury yields have risen sharply from historically low levels, which translates into a steep fall in prices.
In fact, analysts at Deutsche Bank estimated that the fall in price for the 10-year Treasury note, down more than 10 percent so far this year, has been the worst start to a year for that key bond market benchmark since the late 18th century.
In other market news:
The price of West Texas Intermediate crude oil rose 1.3 percent, but is set to decline for the week, as recession fears cloud the outlook for energy demand.
In Europe, the Stoxx 600 rose 1.8 percent. Hong Kong’s Hang Seng closed with gains of about 2 percent and Tokyo’s Nikkei 225 closed up 1.2 percent.
Bitcoin is up about 3 percent over the last 24 hours, trading above $21,000. The cryptocurrency has regained lost ground since it recently dipped below $20,000 for the first time since December 2020.
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