US stocks opened Friday as investors braced for a turbulent trading weekend marked by mixed retail earnings and a chorus of hawkish Fedspeak.
The S&P 500 (^GSPC) rose 0.8%, while the Dow Jones Industrial Average (^DJI) added 250 points, or 0.7%. The tech-heavy Nasdaq Composite (^IXIC) rose 0.9%. Treasury yields continued to rise, with the benchmark 10-year note returning above 3.8% and the rate-sensitive 2-year yield heading towards 4.5%.
A meeting of Fed officials on Thursday pushed back against speculation that a pause in monetary tightening is near. The remarks in separate talks across the country weighed on stocks and bonds after huge gains driven by lighter inflation data.
Inflation has only recently shown signs of moderating, and consumer and producer price data are still very high despite having picked up in October. Meanwhile, US retail sales rose at the fastest clip in eight months over the same period, prompting policymakers to hammer home tough messages about the work still to be done to reduce rising costs.
Federal Reserve Bank of Minneapolis President Neel Kashkari said in a webcast of Minnesota Chamber of Commerce events that how much policymakers expect to raise the key federal funds rate remains an “open question.” His comments came after St. Louis Fed President James Bullard and San Francisco Fed President Mary Daly said the central bank is looking at a terminal rate of up to 5.25%.
“Fed Chairman Powell recalibrated monetary policy at the November FOMC meeting by adopting a new ‘speed vs. destination’ paradigm – signaling his intention to push the terminal-fed funds rate higher while done at a slower pace,” EY Parthenon Chief Economist Gregory Daco said in a note. “The challenge for the Fed will be to prevent excessive and counterproductive easing of financial conditions in the face of weaker-than-expected inflation.”
Goldman Sachs Group on Thursday also raised its forecast for the Federal Reserve’s terminal rate to a range of 5% to 5.25%, heading for another 25-basis-point hike in May after increases of that magnitude in February and March. and half a percentage point. in December.
“Inflation is likely to remain too high for a while, and this could put pressure on the FOMC to deliver a longer series of small increases next year,” economists led by Jan Hatzius also said.
In the shadow of renewed rate hikes, Gap (GPS), Ross Stores (ROST), and Williams-Sonoma (WSM) finished a busy week of retail earnings.
Gap Shares jumped 9% Friday morning after the company revealed results that beat Wall Street estimates. Chief Financial Officer Katrina O’Connell, however, emphasized that the macroeconomic environment remains challenging, but that Gap will take a “prudent approach in light of the uncertain consumer”.
Shares of Ross Stores rallied 16% after the retail chain beat earnings forecasts and raised its fourth-quarter guidance, citing sales momentum and improved assortments for the holidays.
Meanwhile, shares of home furnishings retailer Williams Sonoma sank nearly 9% after it pulled its guidance through 2024 due to “macro uncertainty.”
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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