Stocks rose sharply on Friday, clinching the fourth straight positive week for the S&P 500 as investors celebrated signs that inflation may be peaking.
The Dow Jones Industrial Average added 424.38 points, or 1.27%, to close at 33,761.05. The S&P 500 gained 1.73% to finish at 4,280.15, and the Nasdaq Composite surged 2.09% to 13,047.19.
The S&P 500 rose 3.26% on the week, notching its longest weekly winning streak since November 2021. The Dow was up 2.92% for the week, while the Nasdaq Composite moved higher by 3.08%. For the Nasdaq, it was also the fourth positive week in a row.
The averages have been boosted by positive news on the inflation front. The consumer price index was flat from June to July, thanks in large part to falling gas prices, which lowered headline inflation. The producer price index showed a surprise decline. On Friday, import prices also fell more than expected.
This week's moves have extended a market rally off its mid-June lows. The S&P 500 has gained 16.7% since the lows, and has cut its losses from the peak in half. The Dow had gained nearly 13% and the Nasdaq Composite has rebounded 22.6%.
The positive news has bolstered investor confidence, leading some to believe that the recent gains are more than a typical bear market rally.
"We are not arguing that the market will make new highs this year (we are more in the trading range camp), but we would not be surprised to see a run toward the highs as inflation eases and the Fed slows the pace of rate hikes," Michael Darda, chief economist and market strategist at MKM Partners, said in a note.
Stocks rise into the close
Stocks rallied into the close, with the Dow rising more than 400 points and the Nasdaq popping by more than 2%. The Nasdaq and S&P 500 clinched their fourth straight positive week.
— Jesse Pound
Stocks continue to climb
The market took another leg higher in afternoon trading, with the Dow up more than 300 points. Top performers in the 30-stock average include Disney, Merck and Apple.
The S&P 500 is now up nearly 3% for the week.
— Jesse Pound
Michael Burry warns of 'addictive' consumer behavior: 'Winter coming'
"The Big Short" investor Michael Burry, known for calling the subprime mortgage crisis, warned that "addictive" consumer spending is signaling more trouble ahead.
"Net consumer credit balances are rising at record rates as consumers choose violence rather than cut back on spending in the face of inflation," Burry said in a Friday tweet. "Remember the savings glut problem? No more. COVID helicopter cash taught people to spend again, and it's addictive. Winter coming."
Burry suggested that consumers were still splurging on goods and services at a time when inflation remained at a multi-decade high.
The investor, now running hedge fund Scion Asset Management, has been negative about the markets and the economy. In May, he drew parallels between today's market environment and that of 2008, saying it's like "watching a plane crash."
— Yun Li
Chips mount comeback after early week struggles
A rough start to the week for semiconductors has turned into a small blip for the stock market, Bespoke Investment Group pointed out on Twitter.
After revenue warnings from Nvidia and Micron, the VanEck Semiconductor ETF fell sharply on Monday and Tuesday. But the ETF is now up slightly for the week.
Meanwhile, Nvidia is down just 2.6% for the week after falling 10% over Monday and Tuesday. Micron is up 4% for the week.
— Jesse Pound
Stocks extend gains
Stocks are rising as the afternoon begins. The Dow is now up about 250 points, while the S&P 500 and Nasdaq Composite are up by 1% and 1.4%, respectively.
S&P 500 could be close to signaling whether market has already put in bottom
The S&P 500 has risen above a key technical level for a second day, and if it closes there, that historically could be a signal that stocks have already bottomed.
For a second day Friday, the S&P 500 traded above thet 4,231 level, the 50% retracement from its peak to trough. It has not closed above that level.
Strategists who watch charts say if that level is cleared, then it typically would signal the market has already seen its bottom and will not return to the lows.
"It does mean we're not going to make the low, but it doesn't mean we're going straight up from here," said BTIG's Jonathan Krinsky. He said the big question is whether it will hold the level and close there, or just touch it on an intraday basis.
According to Krinsky, in data going back to 1950, the S&P has never returned to its low after closing above a 50% retracement.
He noted tough in May, 2001, the S&P 500 rose above the 50% retracement but only on an intraday basis, and the bear market continued for another 18 months.
But even if does close above the level, the S&P 500 could still be in for a rough ride.
"Prior 50% retracements in 1974, 2004, and 2009 all saw decent shakeouts shortly after clearing that threshold," Krinsky noted.
Wells Fargo trims Petco price target but still says buy
There's an improving risk versus reward outlook for Petco, but estimates for its second half performance need to come down, according to Wells Fargo.
The firm trimmed its price target on the retailer to $22 from $27, citing a tricky second quarter and a need for the company to manage its expectations in the second half of the year. Petco is expected to report earnings on Aug. 24.
Still, the firm maintained its buy rating on the company, and its new price target represents a more than 40% upside to where shares currently trade.
Over the long term, the "growth story remains attractive, the business is still taking share, and the category is more defensive than getting credit. Adding it all up, we see a solid LT entry point," analyst Zachary Fadem wrote in a Friday note.
— Carmen Reinicke
Lumber prices on track for best week of 2022
Back-to-back inflation reports this week showed easing price pressures, but not everything is going in the right direction. Case in point: Lumber futures prices have surged 22% this week alone, for their first positive week in five and the best week since mid-November. To be sure, lumber prices are still down more than 40% this year.
— Yun Li, Gina Francolla
Cryptocurrencies are on pace for another weekly gain
Cryptocurrencies are on pace to extend their winning streaks.
Bitcoin has gained 3.9%, according to Coin Metrics. Earlier in the week it rose to its highest level since June 13, before it fell to its low, as investors digested two better-than-expected inflation reports. The cryptocurrency is currently on pace for its third up week in the past four.
Enthusiasm around the Merge continues to help the price of ether, which has been leading the crypto market lately. Ether has risen 12.2% for the week and is on track to notch its fifth positive week in the past six.
— Tanaya Macheel
Earnings decline looks less likely, Stoltzfus says
Over the summer, Wall Street has fretted about a pending decline in corporate earnings.
But the second quarter reporting season showed earnings holding up decently, and recent economic data has eased concerns about an imminent recession.
That could mean that earnings in the coming quarters could be a positive surprise, according to John Stoltzfus of Oppenheimer.
"Based on what the jobs number showed us this week, and what the CPI and the PPI in particular showed us this week, this may overall work pretty good for earnings. ... The fundamentals are indeed getting better, even as many challenges remain in the landscape," Stoltzfus said on "Squawk on the Street."
— Jesse Pound
Top economists lower GDP outlook, raise inflation expectations
Economic growth will be slower ahead and inflation higher than previously anticipated, according to a closely watched economist survey released Friday.
The Survey of Professional Forecasters, compiled every three months by the Philadelphia Federal Reserve, resulted in a sharp ratcheting down of the GDP outlook and a sizeable increase in inflation prospects.
Growth in the third quarter is now expected to run at just a 1.4% rate, compared to the previous forecast of 2.5%. For the full year, GDP is expected to rise 1.6% (vs. 2.5% previously), and 1.3% in 2023, a full point lower than the prior outlook.
The 12-month inflation outlook for the third quarter, as gauged by consumer price index, has been raised to 6.7% (vs. 4.5%) while the full-year projection, as expressed on a four-quarter basis from Q4 to Q4, is now put at 7.5% (vs. 6.1%.). Core PCE inflation, which is the Fed's preferred measure, is set at 4.5% for 2022, compared to the previous 4.1%.
Fed officials watch the survey closely and use it to help make decisions on monetary policy. Some of the 35 participants include Jan Hatzius at Goldman Sachs, Mark Zandi from Moody's and Morgan Stanley's Ellen Zentner.
Consumer sentiment tops expectations
The University of Michigan consumer index preliminary August reading came in at 55.1, topping expectations of 52.5, according to Dow Jones.
One year inflation expectations ticked down to 5.0% from 5.2%, though 5-year expectations rose slightly to 3.0% from 2.9%.
The survey has taken on increased importance in recent months after Fed Chair Jerome Powell pointed to its inflation expectations component as motivation for the Fed to move to larger rate hikes.
— Jesse Pound
Stocks open higher
Stocks opened higher on Friday, putting the S&P 500 and Nasdaq Composite on track for their fourth straight positive week. The Dow gained more than 100 points, led by Disney up nearly 2%.
— Jesse Pound
Walmart concerns may be overblown, Morgan Stanley says
Concerns about Walmart's upcoming earnings release may be overblown, even after the company lowered its quarterly and full-year profit outlook, according to Morgan Stanley. The firm has a buy rating and $145 price target on the retailer.
The firm sees a few reasons why Walmart may be in better shape than feared after analyzing numerator data.
1. Walmart is seeing large declines in discretionary categories such as tools and home improvement, home and garden, electronics and sporting goods. But, these are consistent with what the industry is seeing and the consumer spending shift the company has noted. On the flip side, apparel sales at Walmart look solid in the second quarter, suggesting its markdown strategy is working, Simeon Gutman wrote in a Thursday note.
2. The gross margin contraction in the second quarter is probably mostly due to markdowns, which may drag on the second quarter and second half of the year but shouldn't carry forward to 2023.
3. There are signs of higher-income households trading down to shop at Walmart. That's positive for the retailer even as inflation remains high.
Walmart will report its latest quarterly earnings on Aug. 16. Shares closed at about $129 at the end of Thursday's session.
— Carmen Reinicke
Too early to look for Fed pivot, Citi says
Signs of a peak in inflation and negative GDP growth have led some on Wall Street to speculate that the Fed could change its rate hike course, but investors shouldn't bet on that, according to Citi.
Strategist Jamie Fahy said in a note to clients on Thursday evening that the Fed is likely to keep its foot on the gas pedal in the months ahead.
"The levels of inflation are still eyewatering, and the labour market is still uber-tight, so the Fed will want to keep going until inflation is back to target or the labour market breaks. Therefore, upcoming labour market data needs to be very weak and CPI needs to see another big miss in order for the Fed to start its victory lap," Fahy said.
— Jesse Pound
Import prices fell more than expected in July
There was more good inflation news Friday as import prices dropped more than expected in July, according to a report from the Bureau of Labor Statistics.
Prices for goods brought into the U.S. fell 1.4%, the first monthly decline since December and more than the 1% exected drop in the Dow Jones estimate.
As with inflation data earlier in the week, the biggest share of the decline came from fuel prices, which were down 7.5% for the month. Over the past 12 months, fuel and lubricant import prices have soared 56.6%, so the monthly decline marked a big switch.
However, even nonfuel prices dropped, decreasing 0.6% for the month.
Export prices also pulled back sharply, down 3.3% in July on the back of a 3% decrease in agricultural products.
The data backs up reports earlier this week that showed easing in increases for both consumer and producer prices.
Consumer sentiment survey out this morning, with all eyes on inflation outlook
The University of Michigan consumer sentiment survey for August will be out at 10 a.m., and investors will be watching the inflation component with particular interest.
Economists surveyed by Dow Jones expect the survey to register a 52.5 reading, a slight improvement from July's 51.1 and just off the historic low 50 hit in June.
That June reading turned out to be especially significant not just for the top-line measure but also because it showed a tick higher in inflation expectations. Respondents put their one-year outlook at 5.3% but raised the five-year forecast 0.3 percentage point to 3.3% (later revised to 3.1%).
The combination of record-low sentiment and heightened inflation fears prompted the Federal Reserve to signal an 11th-hour switch from a telegraphed 0.5 percentage point interest rate hike to a 0.75 percentage point move.
July's survey saw a decline in the 5-year outlook to 2.9%, but the Fed raised another three-quarters of a point anyway. Consumer sentiment surveys are often tied closely to gas prices, which fell sharply over the past month or so.
Where the rally stands
Nearly two months removed from June lows, the three major averages have made big strides but still remain well below their record highs.
Here's where each stands entering Friday:
The Dow is:
- 9.8% off its record high
- 11.5% off its June low
The S&P 500 is:
- 12.7% off its record high
- 14.7% off its June low
The Nasdaq Composite is:
- 21.17% off its record high
- 20.0% off its June low
— Jesse Pound
House set to vote on climate, healthcare and tax package
The House will vote Friday on the "Inflation Reduction Act," a sweeping piece of legislation that earmarks hundreds of billions of dollars for energy and healthcare. It also includes some tax reform measures, including around corporate taxes.
The bill, which the Senate passed Sunday, outlines $369 billion for energy security and fighting climate change, making it the largest climate package in U.S. history.
The package seeks to accelerate renewable energy development in the U.S. while also incentivizing domestic supply chains.
The bill follows months of discussions between lawmakers, after Senator Joe Manchin voted against the Build Back Better bill.
— Pippa Stevens
Apple shares higher in premarket
Apple shares were in the green following a report from Bloomberg News that the iPhone maker still expected to produce about the same number of smartphones this year as last year. It's also telling suppliers to make about the same amount of the latest generation iPhones this year as in 2021, according to the report.
If true it would counter concerns about a global economic slowdown impacting iPhone demand. Apple shares are down just 5% this year following a 30% rally of its June low. The shares were last up about 0.2% in premarket trading.
U.K. economy contracts in the second quarter as cost-of-living crisis bites
The U.K. economy contracted in the second quarter of 2022, as the country's cost-of-living crisis hit home.
Official figures published Friday showed that gross domestic product (GDP) shrank by 0.1% quarter on quarter in the second three months of the year, less than the 0.3% contraction expected by analysts. It comes after GDP expanded by 0.8% in the first quarter of the year.
Monthly estimates showed that GDP fell 0.6% in June, less than the 1.3% consensus forecast, but down from a revised 0.4% expansion in May.
Last week, the Bank of England warned that it expects the U.K. economy to enter its longest recession since the global financial crisis in the fourth quarter. Inflation, meanwhile, is projected to peak above 13% in October.
- Elliot Smith
European markets cautiously higher as investors track data, monetary policy path
European markets were slightly higher on Friday, with investors charting the course for monetary policy and economic growth.
The pan-European Stoxx 600 nudged 0.4% higher in early trade, with travel and leisure stocks climbing 2.7% as most sectors and major bourses traded in positive territory. Tech stocks slid 0.4%.
The European blue chip index closed Thursday's session in mixed territory, with European stocks having been guided throughout the week mostly by key data points out of the U.S. and a deluge of corporate earnings reports.
Investors in Europe are digesting a slew of economic data releases on Friday, including a preliminary U.K. second-quarter GDP reading, July inflation prints out of France, Spain and Italy, and euro zone industrial production for June.
- Elliot Smith
Tech investor names a 'must own' FAANG stock to buy the dip — and one to avoid
Tech stocks have staged something of a comeback recently, even if the tech-heavy Nasdaq dipped slightly Thursday.
The Nasdaq has rallied about 20% from its June low, while Apple and Netflix have soared around 30% and 50%, respectively, from their lows that same month.
Top investor Paul Meeks revealed his call on two FAANG stocks on CNBC Pro Talks — one, to buy the dip if it drops a bit further, as well as one to hold off on. CNBC Pro subscribers can read more here.
— Weizhen Tan
Major averages are on track for a week of gains
All the major averages are on course to close out the week higher as of Thursday's close.
The Dow ended Thursday up 1.63% for the week, while the S&P 500 and Nasdaq Composite are up 1.5% and 0.97%, respectively.
For the S&P 500 it will be its first 4-week winning streak since November 2021.
All S&P 500 sectors also remain in positive territory, led by energy which is up more than 6%. Financials and materials have both gained more than 3% since the week began.
— Samantha Subin
Stock futures open slightly higher
Stock futures opened slightly higher on Thursday. Futures tied to the Dow Jones gained 0.13%, or 43 points, while S&P 500 and Nasdaq 100 futures rose 0.14% each.
— Samantha Subin
Illumina, Olo shares sink
Shares of Illumina and Olo cratered after hours after both companies shared disappointing guidance.
Illumina's stock sank more than 18% after the healthcare company missed estimates on the top and bottom lines and cut its outlook for the full year. Olo shares slumped 27% as the restaurant tech company shares weak guidance for the full year and the current quarter.
— Samantha Subin
Rivian shares slip nearly 3%
The electric vehicle maker's stock fell nearly 3% despite topping revenue estimates in the recent quarter.
Rivian posted a smaller-than-expected loss and reiterated its full-year delivery guidance but cut its forecast for the year, noting that investors should prepare for a bigger loss and lower capital expenditures ahead.
Shares of Rivian seesawed between slight gains and losses in after-hours trading as investors digested the report.
— Samantha Subin