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Market Snapshot: Dow climbs 600 points as U.S. stocks on track to snap three weeks of losses

U.S. stocks surged to their highest levels of the day Friday morning following a weaker-than-expected reading on inflation expectations. The rise in stocks left all three U.S. equity benchmarks on track to cement their first gain in three weeks.

How are stocks trading?
  • S&P 500 SPX, +2.13% gained 85 points, or 2.3%, to 3882.
  • Dow Jones Industrial Average DJIA, +1.83% gained more than 600 points, or 2%, to 31240.
  • Nasdaq Composite COMP, +2.37% added 310 points, or 2.7%, to 11,543.

On Thursday, the Dow industrials DJIA, +1.83% climbed 194.23 points, or 0.6%, to end near session highs at 30,677.36, after moving between gains and losses. The S&P 500  SPX, +2.13% rose 1% to end at 3,795.73. The Nasdaq Composite COMP, +2.37%  increased 179.11 points, or 1.6%, closing at 11,232.19.

What’s driving the markets?

Behind part of the renewed vigor for stocks has been a moderation in inflation expectations that has occurred this week. On Friday, the University of Michigan’s final reading on consumer sentiment showed expectations for inflation five to 10 years out had been revised lower to 3.1%.

Bond yields have cooled, with the 10-year Treasury note yield TMUBMUSD10Y, 3.113% receding this week at its fastest rate since March, although yields were modestly higher again on Friday.

Market strategists are starting to question whether slowing growth and rising unemployment might already be having an impact on inflation after Federal Reserve Chairman Jerome Powell acknowledged that a recession in the U.S. remained a possibility, although he said the Fed isn’t deliberately trying to provoke one.

On Friday, markets continued to factor in the possibility of “a recession stopping rate hikes in their tracks much sooner,” said Jeffrey Halley, senior market analyst at OANDA, in a note to clients.

Meanwhile, Powell said on Thursday that he doesn’t think a recession is inevitable, but that he does have an “unconditional” commitment to fight inflation. He has also said the Fed hopes to rein in higher prices without sparking an economic downturn.

Market strategists also attributed the bounce in stocks this week to technical factors, as some debated whether this week’s action marked the start of a bear-market rally — or simply fizzle into another “dead cat bounce.”

“The moves this week could still turn out to be the result of a financial market genetically preprogrammed to buy dips in equity and bond prices, thanks to two decades of central bank largess. It could also be a bear market correction as the stampede for the exit door got overdone in the short term, leading to a short-squeeze,” said Halley.

Read: Don’t trust the stock-market bounce until S&P 500 is back above 3,800: analysts

Read: Here’s the comment from Powell that could make it hard for the Fed to slow down the pace of interest-rate hikes

On top of the University of Michigan sentiment data, a gauge of new home sales for May came in stronger than expected. Investors will hear from a pair of Fed speakers on Friday, including St. Louis Fed President James Bullard, who said the Fed must act aggressively to curb inflation before expectations become unanchored.

San Francisco Fed President Mary Daly, who will speak at 4 p.m. Eastern.

Single-stock movers
Other markets
  • The 10-year Treasury yield TY00, -0.08% climbed to 3.12% on Friday, although it remains sharply lower after peaking near 3.50% earlier this month.
  • The ICE U.S. Dollar Index DXY, -0.44%, a measure of the greenback’s strength against a basket of rivals, was off 0.1%.
  • Gold futures GC00, -0.01% expiring in August were down 0.3%.
  • The European STOXX 600 FXXP00, +2.77% climbed 1.7%, while the U.K.’s FTSE 100 UKX, +2.45% index tumbled 1%.
  • The Shanghai Composite was up 0.9%, while Hong Kong’s Hang Seng Index gained 2%; Japan’s Nikkei 225 index rose 1.2%.

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