NEW YORK (AP) — Stocks are closing a wild, whipsaw week for Wall Street with modest gains. The S&P 500 rose 0.5% Friday, coming off its best day since 2022, trimming its loss for the week down to 0.1%. The Dow Jones Industrial Average rose 0.1%, and the Nasdaq composite added 0.5%. Both are also finishing the week with only modest losses after sharp, earlier drops on worries about the U.S. economy and other factors. Expedia Group helped lead the way after a stronger-than-expected profit report. Treasury yields eased in the bond market ahead of big reports coming up next week on the economy.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — After a manic week where Japanese stocks fell to their worst loss since the Black Monday crash of 1987, only for U.S. stocks to soar later to their best day since 2022, slight gains on Friday are carrying Wall Street almost exactly back to where it started the week.
The S&P 500 was up 0.3% in late trading, enough to shave what had been a brutal loss for the week down to 0.2%. The Dow Jones Industrial Average was up 2 points, or less than 0.1%, with less than an hour remaining in trading, and the Nasdaq composite was 0.3% higher.
The gains pulled the S&P 500 back within 6% of its all-time high set last month after it briefly sank nearly 10% below it during the week. But the vicious return of volatility, which shattered what had been a placid run for stocks and saw a measure of fear on Wall Street surge toward its highest level since the 2020 COVID crash, may not be over. Worries are still high about the strength of the U.S. economy, and reports are due next week on inflation, sales at retailers and other measures of economic strength.
For Friday, the mood was still one of calm after more big U.S. companies joined the pile that’s reported better profit for the spring than analysts expected.
Expedia Group jumped 10% after delivering stronger results than forecast, though it said it saw a softening of demand in July like some other companies. Take-Two Interactive rose 3.5% after the company behind the Grand Theft Auto and NBA 2K video games likewise reported a better profit than expected.
The gains followed a mixed performance for stocks worldwide, which have also been frenetic since last week because of a number of factors slamming into markets all at once. At the forefront is the value of the Japanese yen, whose sudden and sharp strengthening recently has forced hedge funds and other traders to scramble out of a popular trade en masse.
They had been borrowing Japanese yen at very low cost and then investing it elsewhere around the world, but a hike to interest rates by the Bank of Japan forced many to abandon the trade at the same time and sent global markets reeling. A promise by a top Bank of Japan official in the middle of the week not to raise rates further as long as markets are “unstable” helped stabilize the yen.
Also weighing on the market have been worries about a slowing U.S. economy. A raft of weaker-than-expected reports has forced questions about whether the Federal Reserve has kept interest rates at too high of an economy-crunching level for too long in order to beat inflation. Last Friday's report showing much weaker hiring by U.S. employers than expected was the lowlight.
Such worries dragged Treasury yields lower in the bond market this week, and they fell again Friday. Yields have dropped as investors look for safer places for their money and as expectations have also for deeper cuts to rates coming from the Fed. The yield on the 10-year Treasury fell to 3.94% from 3.99% late Thursday.
After seemingly getting the Bank of Japan to stop hiking rates for now, Wall Street’s goal “now appears to be bossing the Fed into big rate cuts,” Bank of America strategist Michael Hartnett said in a BofA Global Research report.
Reports next week could drive more swings for the market. On Thursday will come an update on how much shoppers are spending at U.S. retailers. Households at the lower end of the income spectrum have been struggling for a while to keep up with still-rising prices, but economists expect the report to show a return to growth after a stall in retail spending during June.
Another report on Thursday will show how many U.S. workers are applying for unemployment benefits. The most recent such report raised hopes for the economy after the prior week's frightened investors.
Looming over them all will be the latest updates on inflation. A worst-case scenario would be if Tuesday’s and Wednesday’s updates on inflation show higher-than-expected rises in prices at the wholesale and consumer levels, while the week's other reports show a sharp weakening of the economy.
That would be a toxic mix for the Federal Reserve, which doesn't have a good way to fix such a mess. The central bank could lower interest rates, which would give the U.S. economy an upward push but also threaten to worsen inflation. Or it could keep its main interest rate at a two-decade high, where it's been roughly a year. That would put downward pressure on inflation but also inflict more pain on the economy.
To be sure, even though the U.S. economy is slowing, it is not in a recession. And many economists still see one as unlikely.
A third factor that's sent markets spinning recently is increased skepticism about Wall Street's rush into artificial-intelligence technology, and how much in profit growth it will really produce.
The frenzy around AI allowed a handful of Big Tech stocks to drive the S&P 500 to dozens of all-time highs this year, even as high rates weighed on other areas of the market. But the group of stocks known as the “Magnificent Seven” lost momentum last month amid criticism investors got carried away and took their prices too high.
How this handful of stocks performs carries extra impact on the S&P 500 and other indexes because they’re by far the market’s most valuable companies. They were mostly higher Friday after Taiwan Semiconductor Manufacturing Co., a major chip producer, said its revenue in July soared nearly 45% from a year earlier. TSMC's stock that trades in the United States rose 1.8%.
Nvidia, which has become the poster child for the AI trade, slipped 0.3% after flipping between earlier losses and gains.
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AP Business Writer Matt Ott contributed.
Stan Choe, The Associated Press
