Wall Street closes sharply higher, notches weekly gains as Treasury yields ease

By Stephen Culp

NEW YORK (Reuters) - Wall Street rallied on Friday to end a volatile week, as U.S. Treasury yields eased and economic data helped investors look past the growing likelihood that the Federal Reserve will have to keep its restrictive policy in place until late in the year.

All three major U.S. stock indexes surged more than 1%, with the tech-laden Nasdaq climbing close to 2% with a boost from interest rate sensitive megacaps. U.S. Treasury yields eased in the wake of comments from Fed officials that calmed fears over inflation and interest rates.

"It continues to be all about the Fed and how gracefully they can slow the economy," said David Carter, managing director at JPMorgan (NYSE:JPM) Private Bank in New York. "The Fed is telling markets what they want to hear but also injecting the caution that rates may need to go higher depending on the economic data."

For the week, the indexes notched gains, with the S&P snapping a three-week losing streak and the Dow, returning to positive territory year-to-date, enjoyed its first weekly advance since late January.

The week also saw the benchmark S&P 500 break through its 50- and 200-day moving averages, two closely watched technical levels.

"It’s an indication that a shift is transpiring," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "And a lot of people are suspect of it, but they don't want to be left behind."

Economic data released on Friday showed steady demand for services, with purchasing managers' indexes (PMI) from the Institute for Supply Management and S&P Global (NYSE:SPGI) indicating that activity in the sector continues to expand even as input prices cool.

"Investors saw what they wanted in the ISM data, which was basically healthy growth with slowing prices," Carter added. "It suggests they are willing to stay on the plane as they are less worried about the landing."

The Dow Jones Industrial Average rose 387.4 points, or 1.17%, to 33,390.97, the S&P 500 gained 64.29 points, or 1.61%, to 4,045.64 and the Nasdaq Composite added 226.02 points, or 1.97%, to 11,689.01.

All 11 major sectors of the S&P 500 ended the session green, with tech and consumer discretionary enjoying the largest percentage gains.

Fourth-quarter earnings season is on the final stretch, with all but seven of the companies in the S&P 500 having reported. Results for the quarter have beaten consensus estimates 68% of the time, according to Refinitiv.

Still, on aggregate, analysts believe S&P 500 earnings will have fallen 3.2% in the fourth quarter compared to the prior year, and expect negative year-on-year numbers for the first two quarters of 2023. This would imply the S&P 500 entered a three-quarter earnings recession in the closing months of 2022, per Refinitiv.

Apple Inc (NASDAQ:AAPL) jumped 3.5% after Morgan Stanley (NYSE:MS) said the stock could rally more than 20% this year on a potential hardware subscription.

Broadcom (NASDAQ:AVGO) Inc advanced 5.7% after the chipmaker forecast second-quarter revenue above analysts' estimates as increased investments in AI spurred demand for chips.

Among losers, Costco Wholesale Corp (NASDAQ:COST) slipped 2.1% on the heels of its revenue miss, as high inflation dampened consumer demand.

Chipmaker Marvell (NASDAQ:MRVL) Technology Inc slid 4.7% in the wake of the company's quarterly profit miss and disappointing revenue forecast.

Advancing issues outnumbered declining ones on the NYSE by a 4.54-to-1 ratio; on Nasdaq, a 2.36-to-1 ratio favored advancers.

The S&P 500 posted 23 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 79 new highs and 57 new lows.

Volume on U.S. exchanges was 10.83 billion shares, compared with the 11.10 billion average over the last 20 trading days.