(Bloomberg) — Stocks rose, following five straight days of losses in a week marked by intense gyrations as traders weighed bets on tighter Federal Reserve policy amid worries over an economic recession.
The S&P 500 may be in for another dizzying session, with about $1.9 trillion in options expiring — making investors to either roll over existing positions or start new ones.
Banks led the rebound Friday after Citigroup Inc.’s better-than-estimated profit. The dollar fell, while bonds fluctuated.
Traders are watching for signs of capitulation that they hope will set the stage for an equity recovery.
US stocks could see more declines as the risk of a hard recession and a stronger dollar rises in the second half of the year, according to Bank of America Corp. strategists. Equity markets could see “proper capitulation” if the second-quarter earnings season is worse than expected, strategists led by Michael Hartnett wrote.
US retail sales climbed in June by more than forecast.
Fed Governor Christopher Waller on Thursday telegraphed that if the pace of consumer spending doesn’t cool off, that would make him “lean towards a larger hike” in July. Factory output fell, restrained by higher inventories.
New York state manufacturing activity unexpectedly expanded in July, though a measure of the industry outlook deteriorated sharply.
Fed Bank of St. Louis President James Bullard said the central bank may need to raise interest rates to higher levels than previously anticipated after inflation accelerated to a fresh four-decade high.
Officials probably should increase the benchmark to a range of 3.75% to 4% by the end of the year, rather than 3.5%, he noted.
Read: Bostic Signals He Doesn’t Favor 100 Basis-Point July Fed Hike
Rising interest rates, inflation and higher energy prices are posing challenges to investors that they haven’t seen in decades, BlackRock Inc.’s Larry Fink said after the company reported second-quarter earnings that missed Wall Street estimates.
“Markets are reflecting investor anxiety as investors evaluate the potential impact of these pressures,” Fink, the firm’s chief executive officer, said during the earnings call Friday.
Odds are now close to even that the US will slip into a recession within the next year as persistent and rapid inflation emboldens the Federal Reserve to pursue larger interest-rate hikes.
The probability of a downturn over the next 12 months stands at 47.5%, up sharply from 30% odds in June, according to the latest Bloomberg monthly survey of economists.
Read: SocGen Joins Ranks of Forecasters Expecting Full-Point Fed Hike
In other corporate news, Wells Fargo & Co.
missed analysts’ earnings estimates as the Fed’s rate hikes started to cool the once-hot housing market, hurting the company’s mortgage-lending business. UnitedHealth Group Inc.’s second-quarter results were lifted by lower costs of care that portend well for other health insurers but may be a warning sign for hospital companies.
Elsewhere, oil clawed back some of its weekly decline, with President Joe Biden’s trip to Saudi Arabia set to yield no announcement on oil.
Copper tumbled to a 20-month low as industrial metals succumb to mounting worries that a global recession will hurt demand.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.9% as of 9:55 a.m.
New York time
- The Nasdaq 100 rose 0.7%
- The Dow Jones Industrial Average rose 1%
- The Stoxx Europe 600 rose 0.9%
- The MSCI World index rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.3% to $1.0045
- The British pound was little changed at $1.1821
- The Japanese yen was little changed at 138.83 per dollar
Bonds
- The yield on 10-year Treasuries declined one basis point to 2.95%
- Germany’s 10-year yield declined two basis points to 1.16%
- Britain’s 10-year yield was little changed at 2.11%
Commodities
- West Texas Intermediate crude rose 1.4% to $97.08 a barrel
- Gold futures fell 0.3% to $1,700.90 an ounce
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