U.S. stocks regained their footing on Friday, ending the day higher following a recent downdraft. Well-received earnings from Netflix (NFLX) boosted the Nasdaq, while relatively benign comments from a couple of Federal Reserve speakers eased concerns over monetary policy.
The Nasdaq Composite (COMP.IND) ended +2.7%, the S&P 500 (SP500) closed +1.9% and the Dow (DJI) finished +1.0%.
The Nasdaq outperformed the other major averages, climbing 288.17 point to close at 11,140.43. The S&P 500 rose 73.76 points to end at 3,972.61, while the Dow Jones advanced 330.93 points to finish at 33,375.49.
All 11 S&P sectors finished in the green. This included a nearly 4% advance in the Communication Services sector, helped by the NFLX results. Consumer Discretionary, Info Tech and Materials also gained more than 2%.
“Today in each of the indices we saw a countertrend rally. The S&P, the Dow, the Nasdaq and the Russell are in our house view all headed up over the medium term – we believe the 2022 lows were the lows and the new bull phase is in,” Alex King of Cestrian Capital Research told Seeking Alpha, adding that Friday’s trading was also impacted by options expiry.
However, King warned that “right now the short-term trend has been down, a corrective move following the run up from the 2022 lows.” He added that “none of the indices save perhaps the Russell look to us to have completed their corrective phases,” leading him to “treat today’s rally with caution.”
King concluded: “We expect a downward move next before the up-trend resumes – an up-trend which we expect to be the most hated rally since that of 2020 (which was the most hated rally since 2009).”
Looking at Fed speakers, the latest commentary lacked any inflammatory statements, easing worries after strong jobless claims data earlier in the week raised some concerns that the central bank would need to stay hawkish longer than currently projected.
Comments from Federal Reserve Governor Christopher Waller and Philadelphia Fed President Patrick Harker both pointed to 25-basis-point increases in interest rates at the Fed’s next meeting, set to take place in less than two weeks. This outcome is already widely expected by financial markets, with a 99% chance of a 25-basis-point rise now priced in.
Both Fed speakers also suggested that further incremental increases might be necessary to get inflation under control. However, there were signs of dovishness as well. For instance, Waller added that current Fed policy is “pretty close” to sufficiently restrictive.
Friday represented the last day for Fed members to get their message out before the February meeting, as the central bank’s blackout period is set to begin.
Looking to the bond market, yields moved higher, further reversing some of the declines seen earlier in the week. The 10-year Treasury yield (US10Y) climbed 9 basis points to 3.49% and the 2-year yield (US2Y) rose 5 basis points to 4.17%.
Among active stocks, Netflix (NFLX) took a large share of the spotlight. The video streaming giant saw its stock surge 8% following the release of its quarterly results, which included strong subscriber growth.