S&P 500, Dow snap losing streaks for best week since November 2020

Investors got a breather from a painful sell-off as the Dow Jones Industrial Average and S&P 500 rallied to close out their best weeks since November 2020.

The Dow jumped 575.77 points, or almost 1.8%, to 33,212.96. The S&P 500 rose 2.5% to 4,158.24. The tech-heavy Nasdaq Composite was the best performer, helped by strong earnings from software companies and a drop in the 10-year Treasury yield. It ended the day down 3.3% to reach 12,131.13.

All three major averages closed the week higher. The Dow ended a 6.2% gain for the week and snapped its longest losing streak, eight weeks, since 1923. The S&P 500 was up 6.5% and the Nasdaq was up 6.8% for the week . Both indices ended seven-week losing streaks. Part of the week’s gains came on Thursday and Friday, when all three averages rose as strong retail earnings and a slower inflation report lifted sentiment.

“We’re taking a breather here and making some market adjustments to allow for that,” Tom Martin, senior portfolio manager at Globalt Investments, told CNBC. “We’ve come a long way down pretty quickly and if we can stabilize here, then the dips we’ve seen could be all that’s needed, or something like that.”

A report showing inflation slowing somewhat helped lift stocks on Friday. The core personal consumption expenditures price index rose 4.9% in April, down from the 5.2% pace seen the previous month. This particular report is closely watched by the Federal Reserve when setting policy.

On Friday, investors also continued to analyze retail earnings. Shares of Ulta Beauty rose nearly 12.5% ​​after the company reported better-than-expected quarterly results, while Gap added 4.3% despite cutting its earnings forecast.

“The consumer appears to have a ‘bar’ spending approach: low-end necessities and high-end experiences/luxury items are doing well, while general merchandise spending is lagging, i.e. getting a year more of that worn patio furniture is fine,” Wells Fargo’s Christopher Harvey said Friday.

“This week, various retailers began to balance the macro narrative, and the consumer’s demise now appears to have been greatly exaggerated,” he added.

Tech stocks were among the biggest gainers on Wednesday. Software company Autodesk rose 10.3% after reporting strong earnings in its most recent quarter. Dell Technologies jumped 12.8% in profit and chipmaker Marvell advanced 6.7%. Zscaler and Datadog were also up on Friday, up 12.6% and 9.4%, respectively.

The moves came as investors assessed the sustainability of this week’s rally and whether it is a relief bounce or marks the bottom of this year’s sell-off.

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Still, the averages are well below their highs, with the Nasdaq Composite still solidly in bear market territory and the S&P 500 having briefly dipped more than 20% below its record last week.

The Nasdaq is now 25.2% off its record high, while the S&P 500 and Dow are 13.7% and 10.1% off, respectively.

Jeff Kilburg, chief investment officer at Sanctuary Wealth, said he sees the Treasury market as a “beacon of light” for the stock market. The 10-year Treasury yield has fallen below 2.75% from a high of over 3% this year.

“I’m not calling it a bear rally, just a repositioning. A lot of people got too pessimistic,” Kilburg said. “I go back to interest rates. When you saw Treasuries had that rise above 3%, it wasn’t sustainable. When it got below 2.75%, which allowed stocks to heal, that was the short clear deadline to return to actions. .”

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