A disastrous earnings report from Snap and less-than-inspiring results from Dow constituents American Express and Verizon weren’t enough to keep Wall Street bulls at bay on Friday. Stocks rose on hopes the Federal Reserve will soon come to the rescue by slowing the pace of its rate hikes.
The Dow rose nearly 750 points, or 2.5%, even as AmEx (AXP) and Verizon (VZ) fell nearly 2% and 5%, respectively. The Dow has now won for the past three weeks, its longest weekly winning streak of the year.
It was a broad-based rally, with all sectors marching. In fact, Verizon and AmEx were the only two Dow stocks not trading in the green on Friday. Blue chip shares Exxon Mobil (XOM), health insurer Cigna (CI), Big Pharma shares Eli Lilly (LLY) and defense contractor Northrop Grumman (NOC) even hit new all-time highs.
Stocks opened lower but quickly went on the run after a Wall Street Journal The report indicated that while the Fed is likely to raise rates by another three-quarters of a point in November, Fed members are debating whether to signal that there could be a smaller hike in December.
Investors have started to get nervous that the Fed’s series of unprecedented rate hikes could tip the economy into a recession. And apparently, some at the Fed also have doubts about the pace of rate hikes.
Reuters reported that San Francisco Fed President Mary Daly said in a speech on Friday that the central bank should not create an “unforced recession” for the economy with too many massive rate hikes.
Long-term bond yields also fell slightly after the 10-year Treasury rate hit its highest level since late 2007.
“The market was really looking forward to the Fed taking a break,” said JJ Kinahan, chief executive of IG Group North America, owner of online brokerage firm Tastyworks.
“I think it’s the right move to let the rate increases that they’ve already made play into the system a little bit and see what happens,” Kinahan added.
The Nasdaq and S&P 500 also soared, rising 2.3% and 2.4% respectively. All three major market indices are now up around 5% for the week, their biggest gains since June., and have posted solid gains for the month of October.
That’s despite the fact that Snapchat’s parent company (SNAP) plunged nearly 30% after its earnings, news that also sent shares of other social media companies spiraling. Facebook owner Meta fell more than 1% and Pinterest (PINS) sank 6%.
Twitter (TWTR) also fell almost 5%, due to reports that the Biden administration could closely examine Elon Musk’s other businesses on national security grounds before allowing Musk to buy Twitter (TWTR). There were also reports suggesting mass layoffs on Twitter (TWTR) if the CEO of Tesla (TSLA) and SpaceX closes the deal.