U.S. stocks closed sharply higher on Friday, more than shaking off weakness from the previous session in the wake of a poor Treasury auction and fresh signs that yields could stay higher for longer.
Technology stocks led the rally, with the Nasdaq Composite leading the major indexes higher, while it and the S&P 500 posted their highest prices since September.
What happened
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The Dow Jones Industrial Average DJIA rose 391.16 points, or 1.2%, to close at 34,283.10.
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The S&P 500 SPX finished up 67.89 points, or 1.6%, at 4,415.24.
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The Nasdaq Composite COMP rose 276.66 points, or 2%, to end at 13,798.10.
The rally left the Dow Jones with a weekly gain of 0.7%, while the S&P 500 rose 1.3% and the Nasdaq gained 2.4%. The Dow Jones closed at its highest close since September 20, while the S&P 500 ended at its highest since September 19 and the Nasdaq at its highest since September 14.
Market factors
Tech was at the wheel. Shares of Microsoft Corp.
MSFT,
rose 2.5%, with the Dow component posting its third record high in four sessions. Intel Corp. INTC shares,
rose 2.8%, making it the leader among the Dow gainers.
Meanwhile, the S&P 500 tested key chart resistance at the 4,400 to 4,415 level, marking the confluence of prior resistance and the 61.8% Fibonacci retracement of the July-October decline, according to Matthew Weller, global head of research at Forex.com . in a note (see table below).
Forex.com
“From a bigger perspective, bulls will need to see the index break above 4415 for good before they can declare that the post-July streak of lower lows and lower highs is over,” Weller wrote.
The S&P 500 and Nasdaq Composite on Thursday ended their longest winning streak since November 2021, following a poorly received $24 billion sale of 30-year Treasury notes.
A calmer bond market may have set the tone for equities. The yield on the 30-year Treasury bond BX:TMUBMUSD30Y fell 3.2 basis points to 4.733% after making nearly its biggest one-day jump since June 2022. Returns continued to decline weekly for the third time in a row.
It was unclear whether the Treasury auction was affected by a reported ransomware attack on the U.S. unit of the Industrial & Commercial Bank of China, which apparently disrupted the U.S. Treasury market.
To see: How a ransomware attack on ICBC roiled the government bond market and shook up a 30-year bond auction
Thursday’s setback was also linked to comments from Federal Reserve Chairman Jerome Powell, who told an International Monetary Fund panel on Thursday that the central bank was wary of inflation “head fakes” and that it “target of 2% was not insured”.
Much of Powell’s language was nearly identical to comments he made on Nov. 1, when investors rushed into stocks and bonds after the Fed chairman failed to explicitly commit to a further rate hike. But the subsequent rally for stocks after the Nov. 1 Fed meeting, which saw the S&P 500 rise more than 6% in eight days and a 50 basis point drop in 10-year Treasury yields, was “exaggerated and not driven by facts.” . said Tom Essaye, founder of Sevens Report Research, in a note.
“In the meantime, if we think about what the Fed said last week, namely that the rise in 10-year yields did the Fed’s work for it and as a result it may not need to raise rates, the short/sharp drop in the 10-year rate we’ve seen could essentially eliminate the reason why the Fed didn’t need to raise rates – and that could put a rate hike back on the table!” He wrote. “That’s essentially what Powell reminded us of yesterday and that, along with the bad Treasury auction, pushed yields higher,” putting pressure on stocks.
US consumer confidence fell for the fourth month in a row in November due to concerns about higher interest rates and the war in the Middle East. The preliminary result of the sentiment survey fell to 60.4 from 63.8 in October, the University of Michigan said on Friday. It is the weakest level since May.
Investors also listened to more comments Friday from Fed officials, including San Francisco Fed President Mary Daly, who said she did not know whether rates were high enough to bring inflation back to the 2% target. central bank.
Companies in focus
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Shares of Plug Power Inc.
PLUG,
-40.47%
fell 40.5% after the fuel cell company failed to meet analyst expectations and said its performance had suffered from “unprecedented supply challenges.” -
Handelsdesk Inc.
TTD,
-16.66%
Shares fell 16.7% after the ad tech company missed expectations. -
Illumina Inc.
ILMN,
-8.05%
Shares fell 8% after the maker of DNA sequencing technology cut its full-year sales and profit outlook. -
Lions Gate Entertainment Corp.
LGF.A,
-0.66%
Shares fell 0.7% after the TV, film and media giant reported a surprise second-quarter profit and stuck to its full-year guidance “even with the negative impact of the strike” by Hollywood writers and actors earlier this year.