The S&P 500 closed out its best week since June as a report on Thursday showing slowing inflation raised hopes that the Federal Reserve would soon slow its tightening campaign.
The broader market index added 0.9%, to close at 3,992.93. This brought its gain for the week to 5.9%, its best week since the one ended June 24 of this year. The Nasdaq Composite added about 1.9% to end at 11,323.33 as investors snapped up tech shares on hopes interest rates would ease. The Dow Jones Industrial Average gained 0.1%, closing at 33,747.86.
Tech stocks on Friday shook off a decline in cryptocurrencies. Virtual currencies tumbled sharply this week and once again came under pressure Friday after FTX filed for bankruptcy protection, and CEO Sam Bankman-Fried resigned. Bitcoin and ether both declined.
Still, tech stocks and related crypto stocks rebounded after opening lower Friday. The tech sector in the S&P 500 surged 10% through Friday, its best weekly performance since April 2020. Amazon was up more than 4% on Friday, while Google-parent Alphabet was 2.6% higher.
The Dow jumped more than 1,200 points on Thursday following a smaller-than-expected rise in consumer prices for the month of October, giving investors hope that inflation may be cooling. The S&P rose 5.5%, and the Nasdaq Composite surged about 7.4%. It was the best day since 2020 for all three indexes.
Treasury yields plunged Thursday on the back of the weaker-than-expected inflation print. The bond market was closed on Friday to observe Veterans Day.
"From an equity market perspective, as long as the threat of much higher rates is out the way, this should remove a major headwind," Barclays' head of European equity strategy Emmanuel Cau wrote in a Friday note.
All of the indexes posted a winning week. The Dow was up 4.1% on a weekly basis, while the Nasdaq Composite advanced 8.1%. The week marked a resumption of a comeback rally for the bear market, which began in mid-October.
The S&P 500 closed out its best week since June, adding 5.9% this week, amid hopes that the Federal Reserve would soon slow its tightening campaign.
The broader market index added 0.9% on Friday. The Nasdaq Composite added 1.9% as investors snapped up tech shares on hopes interest rates would ease. The Dow Jones Industrial Average gained 0.1%.
— Sarah Min
Citigroup shares gained more than 10% over the past two trading sessions after signs of cooling inflation led to a drop in the U.S. dollar.
The bank's stock rose 3.7% on Friday, following a 6.8% gain in the previous session, which was triggered by Thursday's better-than-expected CPI report. The dollar was headed for its biggest two-day drop since 2009.
Citigroup, led by CEO Jane Fraser, is the most global of large U.S. banks, even after announcing plans to exit at least 13 markets. The weakening dollar reduces pressure on emerging markets and makes overseas revenue more valuable.
"The past two days, we've seen a big relief rally in stocks resulting from lower interest rate expectations and the weakening dollar," said JMP securities analyst Devin Ryan. "That's been more pronounced in companies with significant businesses outside of the US. Citigroup generated more than two-thirds of its revenue outside the U.S."
Citigroup's rise exceeds that of rival lenders, which are more focused on U.S. retail and business customers. The 24-company KBW Bank Index rose 6.8% since Thursday.
Shares of the New York-based bank are still down 17% this year.
—Hugh Son
Strategas' Chris Verrone warns investors against returning to the old market leaders such as tech, saying they remain "broken" even as this week's rally prompted a pivot into stocks most hit by surging inflation and interest rates.
"It's so tempting to want to go back to the old leaders, to go back to the top of the market, the techs, the Apples," Verrone said Friday on CNBC's "Closing Bell." "I think that would be the mistake here."
Instead, Verrone said investors should look to some of the sectors that have already outperformed in 2022. He said energy could demand a larger weighting in the index from here, and recommended adding to financials.
— Sarah Min
Citi opened a negative catalyst watch on Foot Locker, warning of a difficult holiday season ahead for the retailer given its reliance on Yeezys.
Analyst Paul Lejuez lowered his fourth-quarter and fiscal year 2023 estimates, and reduced his price target, saying there are challenges ahead for Foot Locker even if beats expectations in its third quarter earnings report later this month.
"We anticipate a modest EPS beat in 3Q (BMO 11/18). However, the focus will be on 4Q guidance given Adi's decision to cut ties with the Yeezy brand," Lejuez wrote in a Friday note.
The brand came under pressure after Ye, formerly known as Kanye West, made antisemitic comments that prompted Adidas and other companies to cut ties with the rapper. According to Lejuez, Foot Locker "leaned into its partnership" with Adidas to offset a loss with Nike, as the latter ramped up its direct to consumer business.
"Our checks suggest there will be no Yeezy product in stores in 4Q (FL stores boxed up the products and sent them back to Adidas). That means FL is going into the all-important holiday qtr (when the highest proportion of Yeezy/Jordan launch activity takes place) with significantly fewer Jordan Retros and no Yeezys," he wrote.
"We believe this will be significant headwind to 4Q comps," he wrote.
The analyst lowered his price target to $33 from $38. It's about in line with where shares were trading Friday.
— Sarah Min, Michael Bloom
Stocks climbed to session highs with the S&P 500 up 1.05%, as of 2:35 p.m. ET.
The Dow Jones Industrial Average rose 0.12%, after trading in negative territory for the better part of the day. The Nasdaq Composite jumped 2.03%.
— Sarah Min
Investors may have been too pessimistic on Netflix in recent weeks as the company rolled out advertising for the first time, according to JPMorgan.
In a note to clients on Thursday night, analyst Doug Anmuth pointed out that Netflix has given back a lot of its post-earnings pop even though its new advertising tier appears to be off to a good start.
"Our initial time with the ad tier suggests NFLX is attracting a diverse advertiser base - including CPGs, retailers, leisure companies, & luxury brands - & hundreds of advertisers are already onboard," Anmuth said.
Some investors are concerned that the new advertising tier could lure users from more expensive subscriptions without delivering more revenue for Netflix, but Anmuth said he is more optimistic.
"We're encouraged that Basic With Ads (BWA) unit economics should be at least neutral w/Basic across all markets, and we believe significantly accretive in large ad markets such as the US, w/even greater positive impact to revenue and operating profit," Anmuth added.
Shares of Netflix rose about 4.9% on Friday.
— Jesse Pound, Michael Bloom
Pick your poison.
Was it because Ukraine successfully reoccupied the regional capital Kherson, and the Chairman of the Joint Chiefs of Staff General Mark Milley said, "We think there are some possibilities here for some diplomatic solutions."
Was it because President Biden meets China's President Xi Jinping on the sidelines of the UN climate conference Monday in Bali, where they'll no doubt discuss Taiwan as well as Russia?
Or was it Bank of America analyst Ronald Epstein on Friday downgrading shipbuilder Huntington Ingalls and aircraft parts maker Spirit AeroSystems to underperform and L3Harris to neutral? Depending on the contractor, Epstein variously blamed limited growth (HII), less chance of meeting a free cash flow target (SPR) and supply chain snafus lasting into 2024 (LHX).
For any or all of those reasons, defense and aerospace stocks tumbled Friday.
L3Harris Technologies lost as much as 7.8% intraday, Huntington dropped 7.4%, Northrop Grumman (NOC) slid 6.4%, Spirit Aero declined 5.4%, Raytheon Technologies (RTX) fell 5.2% and Lockheed Martin (LMT) slumped 5%.
Losses were smaller among more diversified ETFs: iShares US Aerospace & Defense (ITA) weakened 3% intraday, Invesco Aerospace & Defense (PPA) gave up as much as 2.4% and SPDR S&P Aerospace & Defense (XAR) was off 1.4%.
— Scott Schnipper
Citi has decided to exit its short position on the S&P 500 as markets rally.
The Citi Global Macro Strategy team said there are few negative catalysts hanging over markets through the year-end, as stocks get a boost from a possible reopening in China, as well as a return to risk-on sentiment.
"In truth, it's difficult to find any bearish catalysts between now and the December payrolls, FOMC, CPI," Jamie Fahy wrote in a Thursday note.
"This doesn't mean that we think equities are all of a sudden in a bull-market again. EPS is a major risk in 1H 2023, but over the next 2-6 weeks, the market can painfully squeeze for the bears. We take small profit in our short position."
— Sarah Min, Michael Bloom
Check out the companies making headlines in midday trading.
— Alex Harring
The crypto industry is suffering a major blow after the collapse of FTX and revelations around the company's mismanagement of customer funds. The damage comes right as crypto investors gave in to the idea that the worst of the bear market could be behind them. But although there are likely further losses to be realized, the unfortunate event could be a blessing in disguise for much sought after crypto regulation, JPMorgan analysts said in a note Friday.
"While this is certainly a major short-term setback, we see the widely publicized collapse of FTX as potentially dramatically accelerating the timeline to which crypto-related regulation will be ushered in (similar to new banking regulation which followed the global financial crisis)," the note said.
"As a result, we see the news surrounding FTX as one step back, but one that could prove to be the catalyst to move the crypto economy two steps forward (further unlocking the utility value of blockchain)…" the analysts added. "Moreover, while the news of the collapse of FTX is empowering crypto skeptics, we would point out that all of the recent collapses in the crypto ecosystem have been from centralized players and not from decentralized protocols."
— Tanaya Macheel
Thursday's big move higher was likely a bear market rally, Art Cashin told CNBC on Friday.
"I still think we probably will go back and re-test the lows. Yesterday's rally was borderline miraculous. ... But, not to rain on the parade, you have to remember that rallies in bear markets are short, sharp and die in low volume," the UBS director of floor operations said on "Squawk on the Street."
Check out Cashin's full interview on CNBC Pro.
— Jesse Pound
The dollar index hit its lowest level since August on Friday, falling to a fresh low of 106.594. That's the lowest point since Aug. 18 when the index dropped to 106.505.
The dollar index dropped 3.8% this week, on pace for its worst performance since the week ending Mar. 27, 2020 when it fell 4.33%.
— Sarah Min, Gina Francolla
As of Friday morning, the S&P 500 is up more than 5% this week, meaning the index is on track for its best week since the one ended June 24 this year.
— Sarah Min
Amazon is in the midst of a broad cost-cutting review that could bring down a hammer on its Alexa unit as well as other unprofitable parts of the company, according to a Wall Street Journal article.
Investors in the stock should take note, analysts say.
"We think this is important for the stock as investors were both disappointed by the limited scope of retail cost efficiency targets in 3Q (only $1.5bn) and then more disappointed by Amazon falling short of this goal," wrote Bank of America analyst Justin Post in a Thursday note. He added that Amazon has a hiring freeze in place for some businesses, and employees of unprofitable units have been encouraged to look for jobs elsewhere in the company.
It also hints at a shift in focus towards costs for mega-cap tech stocks, which could be a positive thing for investors.
"This is important symbolically as it is the second mega cap tech company this week (after META's official announcement ) to evaluate how to better manage cash flow through a potentially morechallenging'23…while also investing to maintain leadership in '24 and beyond," wrote Morgan Stanley analyst Brian Nowak in a Friday note.
Nowak estimates that Amazon has spent $10 billion to $15 billion per hear on other bets, and that a 10% reduction could drive $1 billion or 5% to 2023 earnings before interest. The firm reiterated its overweight rating and $140 price target.
Bank of America agrees that better cost efficiency could benefit the stock.
"The WSJ has suggested that this cost review could be bigger than 2017, and anything that brings the 5% US retail margins from 2018 back as an achievable target (vs -1% est. in 2022) would likely be positive for the stock," said Post. He also reiterated his buy rating and $137 price target.
Shares of Amazon are up nearly 4% in midday trading Friday.
—Carmen Reinicke
Shares of UnitedHealth and Merck dragged on the Dow Jones Industrial Average, which was down 136 points, or 0.4%, Friday morning. UnitedHealth dropped 5.4%, and Merck declined 4%.
— Sarah Min
Consumers grew less optimistic in November despite signs that inflation could be leveling off.
The University of Michigan Consumer Sentiment survey, a closely watched gauge on Wall Street, fell to 54.7 for the month, down from 59.9 in October and the lowest reading since July. The drop represented an 8.7% monthly decline and an 18.8% plunge from a year ago, according to the first reading of the survey Friday. Two more revisions follow.
One-year inflation expectations rose to 5.1%, the highest reading since July, while the five-year outlook moved up to 3%, the highest since June.
The future expectations index also showed a steep decline for the six-month outlook, falling to 52.7 from 56.2 in October. Current conditions fell 11.9%, to 57.8 from 65.6, and that sub-index is down 21.5% from a year ago.
The survey comes the day after the Bureau of Labor Statistics said the consumer price index rose 0.4% in October, below the Dow Jones estimate of 0.6%. That set off a wild rally in Wall Street the pushed up the Dow Jones Industrial Average by 1,200 points.
—Jeff Cox
Thursday was a big day for stocks, with all three major indices surging on a better-than-expected October CPI report.
The Nasdaq had a particularly good day, jumping 7.4%. That's a historical leap - it ranks in the top 20 days for the tech-heavy index going back to 1971, according to data from Liz Ann Sonders, chief investment strategist at Charles Schwab.
The data also shows that these outsized moves are more prevalent during bear market cycles, like the one U.S. stocks are currently in.
"Of those largest moves, 16 were during bear markets," Sonders tweeted.
—Carmen Reinicke
Energy and materials stocks led gains in the S&P 500 during Friday morning trading, with each sector up 3.2% and 1.9%.
Energy stocks such as Devon Energy, Halliburton, and Occidental Petroleum were each trading more than 4% higher.
Health care, consumer staples and utilities were the only sectors trading in negative territory. They were down 2.1%, 1.4% and 0.8%, respectively.
Eight out of 11 sectors in the S&P 500 were trading higher. The broader market index was up 0.3%.
— Sarah Min
It was a historic day Thursday for the major averages, with the S&P 500 advancing more than 5% for the first time since since 2020, and posting its biggest outperformance against the the Dow since 2001, according to BTIG.
Regardless, BTIG's Jonathan Krinsky remained skeptical.
"While these are clearly positives and could open the door for the SPX to test ~4,083 (9/13 gap-fill and 200 DMA), Thursday's action alone is insufficient evidence to change our primary cautious view," he wrote in a Friday note.
Investors should remember that the biggest bear market rallies occur during bear markets, a point that Krinsky underscored with historical data.
"[The] Nasdaq 100 (NDX) gained 7.49%. Of the 20 largest NDX daily gains since 1990, 16 of them happened either between April 2000 and May 2002, or in October 2008, none of which marked the end of those bear markets," he wrote.
— Sarah Min
Stocks opened little changed Friday after posting their biggest one-day rally since 2020.
The Dow Jones Industrial Average and the S&P 500 was flat, and the Nasdaq Composite dipped 0.32%.
— Sarah Min