Wall Street rallies and posts longest weekly losing streak in decades

  • PCE price index indicates inflation peaked in March
  • Dell Climbs on Strong First Quarter Results
  • Gap and American Eagle Outfitters cut earnings forecasts
  • Indices jump: Dow 1.76%, S&P 2.47%, Nasdaq 3.33%

NEW YORK, May 27 (Reuters) – Wall Street closed sharply higher on Friday as signs of a spike in inflation and consumer resilience pushed investors into the long holiday weekend with growing optimism about the ability of the Federal Reserve to tighten its monetary policy without tipping the economy into recession.

The three major U.S. stock indexes put a decisive end to their longest weekly losing streaks in decades.

The S&P and Nasdaq suffered seven straight weekly declines, the longest since the end of the dot-com meltdown, while the Dow’s eight-week selloff was the longest since 1932.

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“The market has now shrugged off a lot of negative news, many of which hit at the same time,” said Keith Buchanan, portfolio manager at GLOBALT in Atlanta. “Now we’ve absorbed this news and the actions the Fed is going to take, and we’re ending earnings season.”

“The signs line up and the boxes are ticked that we expect to develop when the market starts to bottom out,” Buchanan added.

In the S&P’s seven consecutive weeks of losses, from its April 1 close to May 20 on Friday, the flagship index lost 14.2% of its value and threatened to confirm that it had been in a bear market since its January 3 closing record.

But this week, in a sharp turnaround, the S&P clawed back much of that lost ground as it soared 6.6%, its best week since November 2020.

“It was inevitable that the losing streak would end,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. “Corrections and bear markets are followed by ‘bull’ markets.”

Generally optimistic earnings forecasts and strong economic indicators have fueled hopes that the Fed’s hawkish maneuvers to contain decades-high inflation will not chill the economy into contraction.

Data released on Friday showed better-than-expected consumer spending and seemed to confirm that inflation, which has dampened corporate earnings forecasts and weighed on investor sentiment, has peaked. Read more

This, combined with the minutes of the central bank’s latest policy meeting, which reaffirmed its commitment to rein in the surge in prices while remaining sensitive to economic data, helped boost risk appetite.

The Dow Jones Industrial Average (.DJI) rose 575.77 points, or 1.76%, to 33,212.96, the S&P 500 (.SPX) gained 100.4 points, or 2.47%, to 4,158.24 and the Nasdaq Composite (.IXIC) added 390.48 points, or 3.33%, to 12,131.13.

All 11 major sectors of the S&P 500 advanced amid weak trading, with consumer discretionary (.SPLRCD), technology (.SPLRCT) and real estate (.SPLRCR) posting the largest percentage gains.

Shares of Apple Inc (AAPL.O), Microsoft Corp and Tesla Inc (TSLA.O) provided the biggest gain.

The first-quarter earnings season is largely in the bag, with 488 of the S&P 500 companies reporting. Of these, 77% exceeded consensus expectations, according to Refinitiv.

Ulta Beauty (ULTA.O) gained 12.5% ​​on the release of upbeat quarterly results.

Computer hardware company Dell Technologies Inc (DELL.N) jumped 12.9% after beating quarterly profit and revenue estimates. Read more

Clothing retailers Gap Inc (GPS.N) and American Eagle Outfitters (AEO.N) cut their full-year profit forecasts. The latter fell 6.6%, while the former rebounded and ended up 4.3%. Read more

Trading volumes were light ahead of the long weekend, with U.S. stock markets closed Monday for Memorial Day.

Volume on U.S. exchanges was 10.92 billion shares, compared to an average of 13.13 billion over the past 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a ratio of 6.49 to 1; on the Nasdaq, a ratio of 4.13 to 1 favored advancers.

The S&P 500 posted 3 new 52-week highs and 29 new lows; the Nasdaq Composite recorded 40 new highs and 84 new lows.

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Reporting by Stephen Culp in New York Additional reporting by Devik Jain and Anisha Sircar in Bengaluru Editing by Vinay Dwivedi and Matthew Lewis

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