U.S. Stocks Move Sharply Higher, Extending Recovery From Recent Lows

After turning positive over the course of Thursday’s session, stocks showed another strong move to the upside during trading on Friday. With the rally on the day, the major averages climbed further off their recent lows.

The major averages finished the session just off their best levels of the day. The Dow jumped 387.40 points or 1.2 percent to 33,390.97, the Nasdaq soared 226.02 points or 2.0 percent to 11,689.01 and the S&P 500 surged 64.29 points or 1.6 percent to 4,045.64.

For the week, the tech-heavy Nasdaq spiked by 2.6 percent, while S&P 500 and the Dow shot up by 1.9 percent and 1.8 percent, respectively.

The rally on Wall Street came as traders continued to pick up stocks at relatively reduced levels following recent weakness, as the gains posted by the Nasdaq and S&P 500 on Thursday came after they hit their lowest intraday levels in over a month.

A pullback by treasury yields also generated some buying interest, with the yield on the benchmark ten-year note giving back ground after jumping to a three-month closing high above 4.0 percent.

Traders also reacted positively to a report from the Institute for Supply Management showing a very slight slowdown in the pace of growth in U.S. service sector activity in the month of February.

The ISM said its services PMI edged down to 55.1 in February from 55.2 in January, although a reading above 50 still indicates growth in the sector. Economists had expected the index to slip to 54.5.

Andrew Hunter, Deputy Chief US Economist at Capital Economics, said the dip by the index “suggests activity continues to expand at a reasonably healthy pace, but provides further reason to doubt the idea that there has been a resurgence in growth since the start of the year.”

The report also showed the prices index fell to 65.6 in February from 67.8 in January, pointing to a slowdown in the pace of price growth.

“Overall, there isn’t much in the ISM services report to suggest the Fed needs to raise rates significantly higher than previously planned,” said Hunter.

Analysts also attributed the strength on Wall Street to the Federal Reserve’s monetary policy report saying “high inflation is not becoming entrenched.”

Sector News

Banking stocks moved sharply higher over the course of the session, driving the KBW Bank Index up by 1.9 percent. The index rebounded after ending the previous session at its lowest closing level in over a month.

Significant strength was also visible among software stocks, as reflected by the 1.8 percent gain posted by the Dow Jones U.S. Software Index.

Natural gas stocks also turned in a strong performance amid a substantial increase by the price of the commodity, with the NYSE Arca Natural Gas Index climbing by 1.7 percent.

Brokerage, housing and commercial estate stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index surged by 1.6 percent, while China’s Shanghai Composite Index rose by 0.5 percent.

The major European markets also moved to the upside on the day. While the U.K.’s FTSE 100 Index closed just above the unchanged line, the French CAC 40 Index advanced by 0.9 percent and the German DAX Index jumped by 1.6 percent.

In the bond market, treasuries showed a significant rebound after moving sharply lower over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 10.9 basis points to 3.964 percent.

Looking Ahead

Next week’s trading is likely to be driven by reaction to congressional testimony by Federal Reserve Chair Jerome Powell as well as the closely watched monthly jobs report.

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