Stocks Close Higher After a Bumpy Week

Federal Reserve Chair Jerome Powell told investors that the central bank would "proceed carefully" on any further rate increases in a much-anticipated speech Friday. Investors are split over whether there will be more.

Interest rates are at a 22-year high after the Fed lifted them again last month. During his speech in Jackson Hole, Powell cautioned that past interest-rate increases had yet to slow the economy fully but noted that stronger and sustained growth could require higher rates to keep inflation declining.

Stocks moved between gains and losses after Powell's speech, before closing higher. $S&P 500(.SPX)$  added 0.7%, with all 11 sectors posting gains. Some investors said the choppy trading was likely because of lower summer trading volumes, with many on vacation.

$DJIA(.DJI)$  climbed 0.7%, and the $NASDAQ(.IXIC)$  rose 0.9%

What Drove Markets

The sharp rise in stocks in the three major indexes temper losses from earlier this week, with only the Dow ending the week lower. Investors have worried that elevated interest rates were starting to weigh on consumer spending, a driver of the economy, following earnings reports from $Dick's Sporting Goods(DKS)$   and $Macy's(M)$  . While Powell left potential rate increases as an option, investors expect they won't come until the end of the year.

Elevated rates have helped to curtail inflation, which has retreated from the 40-year high it hit last summer. The Fed is trying to thread the needle between slowing hiring, investment, and spending to bring down inflation further without providing so much restraint as to create a needlessly severe economic slowdown.

Investors in interest-rate futures markets are divided as to whether the Fed will raise rates at least once more this year or hold them steady, though bets on another rise edged up Friday, according to CME Group. Investors see a 53% chance of an additional increase by the end of the year, up from about 46% Thursday.

"There's a little bit of a cloud of uncertainty looming as we go forward from here," said Charlie Ripley, senior investment strategist for Allianz Investment Management. "There's some uncertainty around the road ahead and the path of policy, which is leaving a little optionality for the Fed."

Short-term Treasury yields, especially sensitive to the near-term outlook for interest rates, climbed higher Friday. The benchmark two-year Treasury note ticked up to 5.054%, from 5.016% Thursday. Longer-term Treasury yields edged up, with the yield on the benchmark 10-year note rising to 4.239%, from 4.234% Thursday.

Meanwhile, shares of $Rite Aid(RAD.US)$ plunged by about 50% after The Wall Street Journal reported the drugstore chain is preparing to file for chapter 11 bankruptcy in the coming weeks. $Hawaiian Electric Industries(HE.US)$ shares shed almost a fifth of their value after Maui County sued the utility and S&P Global Ratings cut its credit rating further.

Europe's pan-continental Stoxx Europe 600 closed flat. Chinese stock indexes slipped overall, but property companies' shares jumped after Beijing unveiled new measures to ease a slump in the real-estate sector.

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