Market Snapshot: U.S. stocks jump, with S&P 500, Nasdaq scoring longest weekly win streak since November 2021

“The S&P 500 has had a great rebound since the June 16 low,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab, in a phone interview Friday. “I think we’ll see another pullback, he said, “but at this point I would be very surprised if we set a new low.”

Inflation may have peaked in June, with the consumer-price-index report for July, released earlier this week, showing signs of price pressures easing, according to Frederick. The notion that the pace of inflation may be slowing from high levels is helping to fuel this week’s rally, he said.

After a week that has delivered optimistic news on both consumer price inflation and producer prices, investors received another encouraging piece of data as the University of Michigan preliminary consumer sentiment index for August showed a modest improvement over July.

The headline index rose to 55.1 in August from 51.5 in July, while one-year inflation expectations dropped to 5% this month, from 5.2% the month prior. Joanne Hsu, director of the survey, pointed to a discrepancy in sentiment between low- and middle-income consumers, and the wealthier subset.

“All components of the expectations index improved this month, particularly among low and middle income consumers for whom inflation is particularly salient. High income consumers, who generate a disproportionate share of spending, registered large declines in both their current personal finances as well as buying conditions for durables,” Hsu said.

Others saw the data as the latest indication that the Federal Reserve is succeeding in its battle against inflation.

“All things considered, we still think that headline inflation will drop below 2% by the middle of next year. But we would stress that the balance of risks is shifting, with downside risks now dominating. It’s no longer out of the question that headline inflation could briefly turn negative in the second half of 2023,” wrote Paul Ashworth, chief U.S. economist at Capital Economics.

All three major stock benchmarks scored weekly gains, with the blue-chip gauge Dow Jones Industrial Average rising 2.9%, the technology-heavy Nasdaq Composite gaining 3.1% gain and the S&P 500 advancing 3.3%, FactSet data show.

That marked a fourth straight week of gains for both the S&P 500 and Nasdaq, their longest winning streaks since the week ending November 5, 2021, according to Dow Jones Market Data.

Still, small-cap stocks booked stronger gains this week, with the Russell 2000
RUT,
+2.09%
Index surging around 4.9%, FactSet data show.

“They had gotten very cheap,” after underperforming in “the selloff in the first part of this year relative to large-caps,” said Justin Tugman, a portfolio manager at Janus Henderson who focuses on small-cap and mid-cap value stocks, by phone Friday. He said that many small-cap companies have seen “strong earnings,” particularly within industrials.

As investors worry about the potential for an economic contraction, Tugman at this stage expects the U.S. may see “pockets of recession,” as opposed to one where every industry suffers. He pointed to weakness “on the consumer-side,” in areas such as apparel, as people feel the pinch from high inflation.

As the Fed aims to bring inflation under control by raising interest rates, Richmond Federal Reserve Bank President Thomas Barkin on Friday wouldn’t commit to either a 50 basis point or a 75 basis point rate hike in September, and he also said that he would like to see inflation below the Fed’s 2% target for a “sustained” period before voting to cut interest rates again.

“I’d like to see a period of sustained inflation under control, and until we do that I think we are just going to have to move rates into restrictive territory,” Barkin told CNBC during an on-air interview.

See: Fed’s Barkin wants to keep hiking interest rates until there is a ‘sustained period’ of inflation under control

Charles Schwab’s Frederick said that he is currently expecting the Fed to raise its benchmark rate by 0.5% at its September meeting, followed by potentially a quarter point hike in November. “I expect the pause to probably happen in December, which means the tightening cycle is probably over by the end of the calendar year,” he said.

All told, U.S. stocks continued to flash a bullish signal on Friday, said Mohannad Aama, a portfolio manager at Beam Capital Management. “Overall, still it is clearly risk-on this week and into today so far,” Aama said.

See: Corporate bond funds see biggest inflows since January, Bank of America says

Which companies were in focus?

•  Rivian Automotive Inc.
  RIVN,
  -0.13%
  said it lost $1.7 billion, or $1.89 a share, in the second quarter, compared with a loss of $580 million, or $5.74 a share, in the year-ago period. Shares of Rivian edged down 0.1%.

• PetroChina,
  601857,
  +0.96%
  China Life Insurance
  601628,
  +1.60%,
  Sinopec
  600688,
  +1.31%
  and China Petroleum & Chemical Corp
  600028,
  +0.24%
  and Aluminum Corp. of China
  601600,
  +1.53%
  were among the companies to have separately announced their intention to delist from the New York Stock Exchange, a unit of the Intercontinental Exchange. Shares of PetroChina, ChinaLife, China Petroleum, Aluminum Corp. of China and Sinopec all fell.

• AMC Entertainment Holdings Inc.
  AMC,
  -4.01%,
  Bed Bath & Beyond Inc.
  BBBY,
  +21.83%
  and GameStop Corp.
  GME,
  +3.27%
  were mixed Friday amid a meme stocks rally. AMC shares fell 4%, Bed Bath & Beyond soared 21.8% and GameStop gained 3.3%.

How did other assets fare?

• The yield on the 10-year Treasury note
  TMUBMUSD10Y,
  2.838%
  fell 3.8 basis points to 2.848%. Treasury yields and prices move in opposite directions.

• The ICE U.S. Dollar Index
  DXY,
  +0.56%,
  a gauge of the dollar’s strength against a basket of rivals, was up 0.5%.

• Bitcoin
  BTCUSD,
  +0.52%
  was trading 0.4% lower at $24,124.

• In oil futures
  CL.1,
  -2.61%,
  West Texas Intermediate crude for September delivery
  CLU22,
  -2.61%
  fell 2.4% to close at $92.09 a barrel. The U.S. oil benchmark rose 3.5% for the week.

• Gold futures ended higher, with gold for December delivery
  GCZ22,
  +0.65%
  rising 0.5% to settle at $1,815.50 an ounce, with the most-active contract rising for a fourth straight week in its longest win streak since Dec. 31, 2021, according to Dow Jones Market Data.

• In European equities, the Stoxx Europe 600
  SXXP,
  +0.16%
  closed 0.2% higher for a weekly gain of 1.2%. London’s FTSE 100 Index
  UKX,
  +0.47%
  rose 0.5% Friday, bringing its weekly rise to 0.8%.

• In Asia, the Shanghai Composite Index
  SHCOMP,
  -0.15%
  ended 0.1% lower Friday, but gained 1.5% for the week. The Hang Seng index
  HSI,
  +0.46%
  gained 0.5% in Hong Kong on Friday, paring its weekly loss to 0.1%. Japan’s Nikkei 225 JP:NIK climbed 2.6% Friday, bringing its weekly gain to 1.3%.

—Barbara Kollmeyer contributed to this report.