Stocks and index ETFs are surging on Friday as investors buy back oversold stocks with the hope that a bottom may be in the market and recession fears will be less pronounced than projected.
Stock indexes have continued to retrace some of the worst losses this month, as a consumer sentiment reading and Federal Reserve data suggested a modest adjustment to inflation expectations.
Stocks are higher overall this week, buoyed by confidence that the Federal Reserve seems committed to fighting inflation. The S&P 500 is up 5% for the week, while the Nasdaq Composite gained 6%, and the Dow rallied 4% this week.
Fed Chair Jerome Powell acknowledged this week that a recession was “certainly a possibility” yet not the “intended outcome” after the Fed recently hiked rates by 75 basis points.
“Really, investors want the chair to understand that inflation is a significant problem and that dealing with it earlier is actually better for the long-term,” Diane Jaffee, group managing director and senior portfolio manager of TCW Group, told Yahoo Finance Live on Thursday. “So I think investors are taking heart that the Fed is going to do whatever it takes.”
Meanwhile, consumer sentiment numbers were abysmal for June, reaching a record low of 50, according to a University of Michigan survey released Friday morning. Nevertheless, investors seemed to have focused on a number inside the report, revealing 12-month inflation projections by consumers reverting to 5.3%.
“On balance, sentiment is mixed,” wrote Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. “Consumers are getting out and paying for ‘experiences,’ namely travel, leisure, beauty items, household essentials, etc. Elevated inflation, particularly higher food and energy costs, are among headwinds widely expected to crimp discretionary spending in the near-term.”
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