Dow jumps 600 points as market comeback this week gains steam

Stocks jumped Friday as Wall Street looked to grind out a rare positive week in what has been a rough first half of the year.

Major averages hit their highs of the session after a consumer sentiment reading closely followed by the Federal Reserve showed a slight easing of inflation expectations.

The Dow Jones Industrial Average rose 629 points, or 2.1%. The S&P 500 was 2.3% higher, while the Nasdaq Composite advanced 2.3%.

Stocks appeared to have found some stability this week, at least for the short term, rallying from the lows of the bear market. The S&P 500 is up 5% for the week, while the Nasdaq Composite is up 6% and the Dow is 4% higher.

All three averages are looking to snap three-week losing streaks, even as many market participants on Wall Street maintained a gloomy economic outlook.

“We believe that bounce in U.S. equity markets over the past three trading days has been a bear market rally off deeply oversold conditions,” Wolfe Research’s Chris Senyek wrote in a Friday note.

“While there may be some additional near-term follow through, we believe that our intermediate-term bearish base case remains intact and that the next leg down is going to be driven by rising recession risks and downward earnings revisions,” Senyek added.

Consumer sentiment hit a record low reading of 50 in June, according to a University of Michigan survey released Friday morning. While on the surface that is not positive for the market, investors liked a figure inside the report which showed 12-month inflation expectations by consumers easing back to 5.3%.

A preliminary reading earlier this month that was pivotal in influencing the Fed to get more aggressive with its rate hike showed inflation expectations at 5.4%.

“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.”

The rally was broad-based, with 484 stocks in the S&P 500 positive for the day.

Cruise line stocks led the S&P 500 gains. Shares of Carnival Corporation rallied 9% after the company said booking volumes in its most recent quarter were “nearly double” the volumes in the first quarter, or the company’s “best quarterly booking volumes since the beginning of the pandemic.”

Royal Caribbean Group surged 12%. Norwegian Cruise Line Holdings’ rallied 11%.

Financials were the best-performing sector in the broader market index after a succession of the nation’s largest banks passed the Federal Reserve’s annual “stress test.” The central bank said they have strong pools of capital to weather a severe recession.

Wells Fargo’s stock price jumped 7%. Capital One’s gained 6%.

On the corporate front, shares of FedEx surged 9% despite a mixed fourth-quarter report after the logistics company delivered an upbeat earnings forecast.

Volatility on Wall Street is expected to be elevated Friday, as FTSE Russell completes its annual index rebalancing, shifting the makeup of tracking indexes that contain trillions of dollars. Rebalancing days are typically accompanied by heavy trading volumes as well.

Among the biggest changes will be the additions of tech companies such as Meta and Netflix to the Russell 1000 value index after their stock tumbles this year, according to a Wall Street Journal report. Shares of Meta and Netflix spiked 5% and 4%, respectively.