Stocks Close Higher to Finish Strong Week

The Dow Jones Industrial Average ran for its best three-week run since November 2020, buoyed by the prospect of a slower pace of interest rate hikes and the latest batch of corporate earnings.

Major indices started Friday lower before rising, ending the session near their daily highs. The Dow added 748.97 points, or 2.5%, to 31,082.56. The S&P 500 added 86.97 points, or 2.4%, to 3,752.75. The technology-focused Nasdaq Composite added 244.87 points, or 2.3%, to 10859.72.

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All three major indices finished with weekly gains of at least 4.7%, a respite after a prolonged period of volatility that has been marked by wide swings in stocks and bonds around the world. The Dow Jones and S&P 500 finished their best weeks since June, while the Nasdaq closed with its best week since July.

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Major indexes rose and Treasury yields halted their rise as The Wall Street Journal reported that Federal Reserve officials are set to raise interest rates by 0.75 percentage point at their Nov. 1-2 meeting, but they are prepared to debate switching to a smaller increase in December. .

The way markets usually work is that when demand increases, prices increase, and that motivates producers to increase supply. The WSJ’s Dion Rabouin explains why the old economic equation of supply and demand doesn’t work right now. Illustration: David Fang

Concerns about the pace of interest rate increases, and whether they will help push the US into a recession, have caused a strong sell-off throughout the year.

“I think we’re on the last few innings of the Fed’s maximum hard line,” said Christian Hoffmann, a portfolio manager at Thornburg Investment Management who oversees bonds.

The yield on the 10-year Treasury note fell on Friday, but rose for the 12th straight week, posting its biggest gains in that period since 1987. The yield on the benchmark note ended the week at 4.212%, close to its lowest levels. heights of the past. decade.

The yield on the two-year Treasury note, which is typically more sensitive to interest rate expectations, also fell on Friday, closing the week at 4.489%.

Investors have been watching earnings closely for clues about how rising rates, a strong dollar and high inflation are hurting company profits. Third quarter results so far have been mixed. US banks helped buoy markets earlier this week with better-than-expected results, but cracks are being seen elsewhere. So far, the net profit margin of S&P 500 companies in the third quarter will decline for the fifth consecutive period.

Snap shares fell $3.03, or 28%, to $7.76, after the company reported a further slowdown in sales growth and signaled the digital ad market could remain lackluster for some time.

“The reality is that we see weak growth, higher inflation and earnings that surprise to the downside. It’s quite a difficult combination,” said Luca Paolini, chief strategist at Pictet Asset Management. “This earnings season will continue to be good. The concern is for the next two, in a way.”

Shares of Twitter fell $2.55, or 4.9%, to $49.89, after Bloomberg News reported that Biden administration officials are discussing whether the United States should subject some of Elon Musk’s companies to national security reviews.

Still, the week has been peppered with several signs that the US economy is stronger than many initially feared. Various corporate leaders, from JPMorgan Chase to Delta Air Lines, have expressed confidence that the consumer remains strong. And new data on Thursday showed the labor market remains healthy.

In the UK, markets came under pressure on Friday as investors wondered who would win the race to become the country’s next prime minister after Liz Truss stepped down on Thursday.

His election and resignation have caused wild swings in the country’s currency and bonds. The UK 10-year bond yield rose to around 4.05% from 3.860% on Thursday. Bond yields rise when prices fall.

Traders worked the floor of the New York Stock Exchange earlier this week.


Photo:

Michael M. Santiago/Getty Images

The UK’s FTSE 100 Index rose 0.4%. Pan-European Stoxx Europe 600 fell 0.6%

In commodity markets, oil prices rose. Brent crude, the international benchmark, gained $1.12, or 1.2% a barrel, to close at $93.50.

Asian stocks were mixed. China’s benchmark Shanghai Composite Index rose 0.1%, while Hong Kong’s Hang Seng fell 0.4% and Japan’s Nikkei 225 Index lost 0.4%.

Email Gunjan Banerji at [email protected] and Chelsey Dulaney at [email protected]

Corrections and Extensions
Christian Hoffmann is a portfolio manager at Thornburg Investment Management. An earlier version of this article incorrectly spelled his last name as Hoffman. (Corrected on October 21)

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