U.S. stocks rose to close higher on Friday, with equities rebounding from a multiday rout that slashed 1,400 points from the Dow Jones Industrial Average at its worst and left the Nasdaq on the precipice of a correction.
How did the benchmarks fare?
The Dow Jones Industrial Average DJIA, +1.15% whipsawed but ended the day up 287.16 points, or 1.2, to 25,339.99. Earlier in the day, the Dow flirted with another day of losses, turning red after hitting a session high of 25,467.55.
The S&P 500 SPX, +1.42% added 38.76 points, or 1.4%, to 2,767.13, snapping a six-day losing streak, its longest such stretch of losses since a nine-day drop that ended in November 2016.
The Nasdaq Composite Index COMP, +2.29% staged the most impressive comeback of the three adding 167.83 points, or 2.3%, to 7,496.89, its best daily performance since March 26.
For the week, the Dow is down 4.2%, the S&P lost 4.1% and the Nasdaq fell 3.7%, representing their worst weekly performances since March.
Both the Dow and the S&P have fallen for three straight weeks, while the Nasdaq has dropped for two.
What drove the market?
Investors continued to monitor rising bond yields, which had been a primary catalyst for falling stock prices over the week. Friday also marked the unofficial start to the third-quarter earnings season. JPMorgan Chase & Co. JPM, -1.09% Citigroup Inc. C, +2.14% and Wells Fargo & Co. WFC, +1.30% all reported, providing the first clues into how American corporations are faring.
Third-quarter earnings will be a major driver as companies report over the coming weeks. According to FactSet, analysts are looking for earnings growth of about 19% and sales growth of 7%. While such growth points to an improving economy, there are also concerns that expectations have gotten too optimistic, or that the quarter could represent peak earnings, as much of the earnings growth can be credited to the tax bill passed late in 2017.
This week’s potent market selloff was sparked by a sudden rise in interest rates, particularly in the long-dated 10-year Treasury note TMUBMUSD10Y, +0.34% which briefly rose to a seven-year high above 3.25% earlier this week.
However, the downdraft has accelerated amid a wave of concerns about stock-market valuations in an environment where the Federal Reserve is steadily lifting interest rates to normalize policy from crisis-era levels.
Higher yields raise borrowing costs for corporations. They also divert investment away from stocks. Market turmoil, however, appeared to have sparked haven demand for U.S. bonds, with the yield on the 10-year note down more than 6 basis points to 3.158%.
In the latest economic data, import prices rose 0.5% in September. Separately, an index of consumer sentiment fell to 99 from a previous reading of 100.1. Investors were looking for a reading of 100.6.
What were analysts saying?
Analysts largely attribute the week’s sorry performance to rising interest rates and comments earlier this month from Federal Reserve Chairman Powell that have been interpreted as indicating plans aggressive rate hikes in the future.
But Friday’s rebound shows that fears about rising rates may be overblown, according to Michael Arone, chief investment strategist for State Street Global Advisors. “Solid earnings helped investors breath a sign of relief,” Arone said. “That gains accelerated towards the close indicates that investors are confident about the economy.”
“What investors need to get their heads around is that even though the U.S. economy is ticking along and the prospect of interest-rate hikes has only dawned on them in the last few weeks, higher interest rates aren’t the end of the world,” said David Madden, market analyst at CMC Markets. “Higher interest rates are warranted when the economy is strong.”
What stocks were in focus?
Shares of JPMorgan fell even as it reported third-quarter earnings and sales that beat expectations. Shares were down 1.1%, as investors worried about the source of future earnings growth.
Citigroup’s third-quarter earnings came in ahead of forecasts but sales missed expectations. The stock rose 2.1%. Wells Fargo reported adjusted earnings that missed expectations but revenue that topped forecasts. Shares gained 1.3%.
PNC Financial Services Group Inc. PNC, -5.58% reported adjusted earnings that topped analyst forecasts, and revenue that grew more than expected. Shares sank 5.6%.
Technology stocks were heavily traded, as investors saw deals to be had following heavy losses earlier in the week. Apple Inc. AAPL, +3.57% rose 3.6% while Google-parent Alphabet Inc. GOOGL, +2.73% GOOG, +2.85% added 2.7%. Microsoft Corp. MSFT, +3.46% rose 3.5%.
Amazon.com Inc. AMZN, +4.03% surged 4% on Friday but lost 6.8% for the week and tumbled into correction territory.
Wedbush Securities upgraded Fitbit Inc. FIT, +2.67% to outperform. Shares rose 2.7%.
Where were other markets trading?
Shares in Asia closed higher in a rebound from recent weakness, although they still posted sharp weekly losses. Major European indexes were also higher on Friday.
Crude-oil prices were unchanged while gold was down 0.7%. The U.S. dollar index DXY, +0.21% rose 0.3%.
