Stocks Surge as Fed Chair Powell Eases Fears of Aggressive Tightening

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Friday closed up +2.39%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +1.47%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +3.70%.

U.S. stock indexes Friday closed sharply higher, led by a rally in technology stocks as they recovered some of this week’s losses.  An easing of rate-hike worries sparked a rally in stock indexes in overnight trade after Fed Chair Powell late Thursday pushed back against speculation of steeper Fed rate hikes.  Friday’s U.S. economic data was mixed for stocks.

Carry-over support from a +0.96% rally in China’s Shanghai Composite is bullish for U.S. stocks after Shanghai said it plans to end pandemic lockdowns by May 20.

Late Thursday, Fed Chair Powell reaffirmed the Fed is likely to raise interest rates by 50 bp at each of its next two meetings and said the Fed isn't "actively considering" a 75 bp move.

Cleveland Fed President Mester said Friday that "unless there are some big surprises, I expect it to be appropriate to raise the policy rate another 50 bp at each of our next two meetings.  If, by the September FOMC meeting, the monthly inflation data provide compelling evidence that inflation is moving down, then the pace of rate increases could slow, but if inflation has failed to moderate, then a faster pace of rate increases may be necessary."

The U.S. Apr import price index ex-petroleum rose +0.4% m/m, weaker than expectations of +0.7% m/m.

The University of Michigan’s May U.S. consumer sentiment index fell -6.1 to a more than 10-year low of 59.1, weaker than expectations of 64.0.

Today’s stock movers…

Technology stocks soared Friday and led the overall market higher.  Atlassian Corp Plc (TEAM) closed up more than +12%.  Also, Zoom Video Communications (ZM), Zscaler (ZS), Crowdstrike Holdings (CRWD), and Okta (OKTA) closed up more than +11%.  In addition, Nvidia (NVDA), Marvell Technology (DXCM), and Advanced Micro Devices (AMD) closed up more than +9%. 

U.S.-listed Macau casino stocks rallied sharply Friday after Shanghai said it seeks to end pandemic lockdowns by May 20.  Las Vegas Sands (LVS) closed up more than +15% to lead gainers in the S&P 500.  Also, Wynn Resorts (WYNN) closed up more than +13%.  In addition, Caesars Entertainment (CZR) closed up more than +10%, Penn National Gaming (PENN) closed up more than +7%, and MGM Resorts International (MGM) closed up more than +4%.   

U.S.-listed Chinese stocks moved higher Friday after Shanghai said it would end pandemic lockdowns and start reopening the city by May 20.   Pinduoduo (PDD) closed up more than +10%.  Also, Baidu (BIDU) and Alibaba Group Holding (BABA) closed up more than +9%.  In addition, JD.com (JD) and NetEase (NTES) closed up more than +5%. 

Energy stocks and energy service providers rose Friday after crude prices jumped more than +4% to a 1-week high, and gasoline prices surged to an all-time high.  Occidental Petroleum (OXY) and APA Corp. (APA) closed up more than +8%.  Also, Marathon Oil (MRO) closed up more than +7%, and Devon Energy (DVN) and Baker Hughes (BKR) closed up more than +6%.  

Nike (NKE) closed up more than +4% Friday to lead gainers in the Dow Jones Industrials after Morgan Stanley said the stock has strong post-pandemic prospects and is under-appreciated by the market.

Twitter (TWTR) closed down more than -9% Friday to lead losers in the S&P 500 after Elon Musk said his deal to buy the company is “temporarily on hold pending details supporting calculation that spam/fake accounts on Twitter represent less than 5% of users.” 

Across the markets…

June 10-year T-notes (ZNM22) on Friday closed down by -26.5 ticks, and the 10-year T-note yield rose +8.5 bp to 2.933%.  June T-notes tumbled Friday as a sharp rally in stocks reduced the safe-haven demand for government debt.  Higher European government bond yields Friday also weighed on T-note prices.  The 10-year German bund yield Friday rose +10.8 bp to 0.948%, and the 10-year UK gilt yield rose +8.3 bp to 1.744%.