Stocks deliver best weekly performance since November 2020 as S&P 500 jumps 6% from last week

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U.S. stocks rallied into the close on Friday to post a fourth consecutive day of gains. The major equity indexes also delivered solid weekly advances as traders took favorably the Federal Reserve’s measured first move on raising interest rates.

The S&P 500 closed higher by more than 1.1%. The index also posted its first weekly gain in three weeks, and its biggest since November 2020, rising more than 6% since last Friday. U.S. crude oil prices rose to hold above $104 per barrel, while the 10-year Treasury yield declined but held above 2.1%.

Meanwhile, shares of GameStop (GME) — the original darling of last year’s Reddit-fueled investing frenzy — turned positive even after the retailer delivered a wider-than-expected fourth-quarter loss. FedEx’s (FDX) stock dropped after the shipping giant posted quarterly earnings results Thursday afternoon. These reflected lower-than-expected profits, as rising labor and shipping costs more than offset FedEx’s price increases to customers.

For U.S. equity investors broadly, news this week that the Fed opted for a 25 basis point rate hike and charted out a route toward six additional rate hikes later this year helped provide clarity on the future monetary policy path and removed an overhang of uncertainty. The size of the interest rate hike was taken as a carefully considered first move, beginning the process of addressing inflation while avoiding delivering a major shock to markets already weighing Russia’s war in Ukraine.

“They took what I would consider the safe route, which was to do 25 basis points,” Sonal Desai, Franklin Templeton Fixed Income chief investment officer, told Yahoo Finance Live on Thursday. “Absent what we are seeing on the geopolitical stage right now, they probably would have gone for 50. So I definitely would not rule out a faster, more front-loaded pace of rate hikes going forward.”

And later, Fed officials may also upwardly revise its projections for where interest rates will end this year, in the event that inflation does not moderate quickly, Desai added. Based on the Fed’s projections from Wednesday, short-term interest rates would likely end the year around 1.75%.

“I could see them going up to 2% this year — we could expect, by the end of next year, looking at something closer to 3%,” she added. “So I’m looking at what the Fed has done. I think it was what as needed because it may come across as hawkish, but the Fed is enormously behind the curve at this point.”

Technology stocks in particular got a boost following the Fed’s decision, with some of the most badly beaten down growth names recovering some year-to-date losses. While some strategists suggested the bottom may have been put in for most tech stocks, others were less certain.

“We did get the hawkish statements out of the Fed [Wednesday], and even though they’re going to be stiff headwinds for tech stocks and other aggressive growth companies, the data is now known. And when it’s known, it’s absorbed in the market,” Paul Meeks, Independent Wealth Solutions Management portfolio manager, told Yahoo Finance. “The thing that I still worry about, and it keeps me away from go all-in in tech, is what’s going on in Eastern Europe, because if we still have geopolitical risks, we still have risks to these stocks.”

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4:05 p.m. ET: Stocks close sharply higher, S&P 500 rises more than 6% on the week

Here’s where stocks ended Friday’s session:

S&P 500 (^GSPC): +51.42 (+1.17%) to 4,463.09
Dow (^DJI): +273.45 (+0.79%) to 34,754.21
Nasdaq (^IXIC): +279.06 (+2.05%) to 13,893.84
Crude (CL=F): +$1.70 (+1.65%) to $104.68 a barrel
Gold (GC=F): -$24.20 (-1.25%) to $1,919.00 per ounce
10-year Treasury (^TNX): -4.6 bps to yield 2.146%

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1:44 p.m. ET: Minneapolis Fed’s Kashkari: Fed may need to act ‘more aggressively” to bring inflation down to 2% target

Minneapolis Federal Reserve President Neel Kashkari warned Friday that the Federal Reserve may need to act more aggressively, and potentially even beyond a neutral policy tilt, in order to bring inflationary pressures back toward the central bank’s goals.

If inflation ultimately attenuates, “the FOMC will need to remove accommodation and get modestly above neutral while the inflationary dynamics unwind,” Kashkari said in a new essay Friday.

However, if the economy ultimately proves to be “in a high-pressure, high-inflation equilibrium,” then the Fed “will need to act more aggressively and bring policy to a contractionary stance in order to move the economy back to an equilibrium consistent with our 2% inflation target,” he added. “Over the course of this year, while we are moving to what I expect will be a neutral policy stance, we will get information to help us determine how much further we may need to go.”

Kashkari also revealed that his dot on the FOMC’s dot plot, or Summary of Economic Projections, saw interest rates ending in a range of 1.75% to 2.00% this year. His estimate for the nominal neutral rate also remained at 2%, where he has had it for several years.

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10:03 a.m. ET: Existing home sales drop more-than-expected in February

Sales of previously owned homes in the U.S. sank in February by the most since May 2020, as rising mortgage rates and still-climbing prices weighed on affordability and overall housing market activity.

Existing home sales dropped 7.2% in February compared to January, the National Association of Realtors (NAR) said Friday. This was bigger than the 6.2% drop expected, according to Bloomberg consensus data. It also came following a 6.6% rise in existing home sales in January.

With February’s declines, existing home sales in the U.S. were at a seasonally adjusted annualized rate of 6.02 million. The median price for an existing home rose 15% over February last year to reach $357,300.

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9:30 a.m. ET: Stocks open lower

Here’s where markets were trading just after the opening bell:

S&P 500 (^GSPC): -13.51 (-0.31%) to 4,398.15
Dow (^DJI): -99.46 (-0.29%) to 34,381.30
Nasdaq (^IXIC): -70.34 (-0.52%) to 13,549.34
Crude (CL=F): +$0.19 (+0.18%) to $103.17 a barrel
Gold (GC=F): -$12.90 (-0.66%) to $1,930.30 per ounce
10-year Treasury (^TNX): -3 bps to yield 2.16%

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7:29 a.m. ET: St. Louis Fed President Bullard calls for Fed to hike rates to more than 3% this year

St
. Louis Fed President Jim Bullard said Friday that he wanted the Federal Reserve to more swiftly raise interest rates and begin the process of reducing its nearly $9 trillion balance sheet in order to bring down inflation.

Bullard was the only member of the Federal Open Market Committee to dissent with the Fed’s decision this week to raise interest rates by 25 basis points. Instead, Bullard wanted the Fed to raise by 50 basis points and also implement a plan to reduce the balance sheet.

“The combination of strong real economic performance and unexpectedly high inflation means that the Committee’s policy rate is currently far too low to prudently manage the U.S. macroeconomic situation,” Bullard said in a statement. “Moreover, U.S. monetary policy has been unwittingly easing further because inflation has risen sharply while the policy rate has remained very low, pushing short-term real interest rates lower. The Committee will have to move quickly to address this situation or risk losing credibility on its inflation target.”

Bullard said that in his dot on the “dot plot,” or Fed’s Summary of Economic Projections, he saw the Fed raising rates to above 3% this year.

“This would quickly adjust the policy rate to a more appropriate level for the current circumstances,” Bullard said. “The Committee has successfully moved in this manner before. In 1994 and 1995, the Committee made a similar discrete adjustment to the policy rate to better align it with the macroeconomic circumstances at that time. The results were excellent.”

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