By Ryan Dezember
The Dow Jones Industrial Average and the S&P 500 had their best day since last month's big postelection rally, ending an otherwise downbeat week for stocks on a high note.
The Dow added 498 points, or 1.2%, the day after the blue-chip index narrowly ended a 10-session skid. The S&P 500 rose 1.1% while the technology-heavy Nasdaq Composite gained 1%.
Each of the major U.S. indexes still ended the week down at least 1.8%, the result of Wednesday's selloff following the Federal Reserve's signal that interest rates might stay higher in 2025 than investors had expected. The Dow ended 2.3% lower, its third straight weekly decline. Ahead of the opening bell, it looked as though stocks would wind up losing more.
The U.S. government was on the brink of shutdown. Rising yields in the aftermath of the Fed's Wednesday meeting had investors second-guessing expensive stocks. Tariff threats by President-elect Donald Trump against Europe sank overseas stocks. Disappointing trial results for Novo Nordisk sent the Ozempic-maker's shares into a tailspin. Nike, a component of the Dow, warned investors to expect lower sales and margins this fiscal quarter.
Yet the Federal Reserve's preferred measure of inflation showed prices rising 0.1% in November, below the 0.2% that economists had predicted. That gave traders a green light to buy.
After opening lower, stocks rebounded sharply.
"The market was already trading on the edge of a knife, so the smallest thing can have such an outsized reaction," said David Volpe, president and deputy chief-investment officer at investment manager Emerald Advisers.
Television interviews by two Fed officials on Friday stoked traders' optimism that the central bank intends to continue to cut rates in 2025, even if at a slower pace than they had been expecting before this week, Volpe said. Meanwhile, more than $6 trillion in options expired Friday, an unusually high volume that added to the wild trading action.
Friday's gains were across the board. All 11 of the S&P 500's industry segments closed higher, led by interest-rate sensitive real-estate and bank stocks.
Greg Wilensky, head of U.S. fixed income at Janus Henderson Investors, said that Friday's reading of the Commerce Department's personal-consumption expenditures price index wasn't low enough to necessitate a January rate cut. "This data does help improve the outlook for more cuts over 2025 than the market currently has priced in," he said.
Bond yields declined Friday. The yield on benchmark 10-year Treasury notes ended at 4.522%. Yields had been climbing for two days to settle at 4.569% on Thursday.
Bitcoin prices also whipsawed Friday. The cryptocurrency reached a record high above $108,000 earlier this week and had fallen below $93,000 early Friday. It rebounded to end at $96,377.74, lifting stocks, such as Coinbase, MicroStrategy and Robinhood.
Overseas stocks mostly fell on Friday. The Stoxx Europe 600 index shed 0.9% after Trump threatened tariffs if the European Union doesn't buy more U.S. oil and natural gas. Japan's Nikkei 225 declined 0.3% while South Korea's KOSPI Composite dropped 1.3%.
In commodities, U.S. natural-gas futures hit a new 2024 high. Futures for January delivery rose 4.6% to end at $3.748 per million British thermal units, the highest price since last January. The onset of wintry weather in the East is lifting demand for the heating and power-generation fuel, which is now about 44% more expensive than a year ago.
Write to Ryan Dezember at ryan.dezember@wsj.com
(END) Dow Jones Newswires
December 20, 2024 16:41 ET (21:41 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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