S&P 500, Dow, Nasdaq rise Friday but still down on week with inflation, Fed, earnings eyed

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Bear market hits Wall Street as stocks dive

Wall Street entered a bear market Monday as the S&P 500 sank 3.9%, bringing it more than 20% below the record high it set in January. (June 13)

AP

 Stocks rose in morning trading on Wall Street Friday following a report showing consumers are still spending, despite record high inflation.

The gains weren’t enough to pull major indexes out of the red for the week, following a series of worrisome reports that showed inflation remains hot.

The S&P 500 rose 1.4% as of 10:16 a.m. Eastern. The benchmark index is still down 1.5% for the week. The Dow Jones Industrial Average rose 527 points, or 1.7%, to 31,157 and the Nasdaq rose 1%.

Banks and healthcare companies made some of the biggest gains. UnitedHealth Group rose 4.3% after raising its profit forecast for the year following a strong earnings report. Citigroup rose 8.7% after reporting encouraging financial results. Wells Fargo’s adjusted earnings per share topped estimates but revenues missed.

Bond yields fell. The yield on the 10-year Treasury slipped to 2.94% from 2.96% late Thursday.

Inflation and the Fed are still in focus

Inflation and its impact on businesses and consumers remain a key focus for Wall Street. A government report showed that retail sales rose 1% in June from May, topping economists’ expectations even as prices for everything from food to clothing rose.

The upbeat retail sales report follows reports earlier this week showing that inflation remains extremely hot. It also presents a mixed picture for investors who are closely watching how the Federal Reserve fights rising inflation.

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The central bank has been raising interest rates in an effort to hit the brakes on economic growth, and curtail rising inflation. A strong retail sales report could mean that it will remain aggressive with its rate hikes. The Fed has already raised rates three times this year and traders expect another big increase at its meeting in two weeks.

Wall Street is worried that the Fed could go too far in raising rates and actually bring on a recession. While upbeat economic data is encouraging, weaker reports could give the Fed more reason to ease up on rate hikes, potentially reducing the risk of pushing the economy into a recession.

China slowdown, corporate results

Overseas, stocks in Hong Kong and Shanghai fell following a report that showed the Chinese economy shrank by 2.6% compared with the January-March period’s already weak quarter-on-quarter rate of 1.4%. China locked down major cities earlier this year to try and contain COVID-19 cases and more outbreaks this week in China and elsewhere in Asia have raised worries that COVID-19 controls might be restored, on top of existing precautions.

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Investors have been reviewing the latest batch of corporate earnings to gain a clearer picture of inflation’s impact on businesses. Banks kicked things off with mixed results this week. Several big companies are on deck for next week, including Johnson & Johnson, Netflix, United Airlines and Twitter.