U.S. stocks experienced a major rebound on Friday, marking the best day on the market in recent months despite the continuation of a four-week losing streak. The S&P 500 surged by 2.1%, following a significant drop that qualified as a “correction,” the first since 2023. This jump mirrored a similar upturn in the cycle of market fluctuations reminiscent of the post-Donald Trump election era which brought a boost to Wall Street.
The Dow Jones Industrial Average saw a rise of 674 points or 1.7%, while the Nasdaq composite increased by 2.6%. The Chief Investment Officer at BMO Wealth Management, Yung-Yu Ma, suggested a “relief rally” might be underway due to the prevailing negativity that has been pervasive among investors. While sentiment shifts can be urgent in one direction, they tend to equilibrate eventually, particularly after the rapid declines from a new record barely a month prior.
A significant source of uncertainty moderated when the Senate took steps to avert a potential partial shutdown of the U.S. government. Historically, government shutdowns have had minimal impact on financial markets, but any reduction in uncertainty is reassuring amid the current volatility affecting the U.S. stock market. This volatility has resulted in dramatic swings on a regular basis.
The situation is further complicated by the ongoing trade war under Trump’s administration, which escalates concerns over the extent of federal pain the economy will undergo due to tariffs and other policies aimed at substantial economic restructuring. Trump continues to advocate for bringing back manufacturing jobs to the U.S. and downsizing the federal workforce along with other systemic changes, fueling these market concerns.
While stock prices are in the process of stabilizing in anticipation of tariffs set for April, Ma indicated that uncertainties surrounding federal spending cuts could have prolonged effects on the economy. With continuous policy shifts, businesses and households have signaled dips in confidence, fearing these instabilities could lead to a decline in spending, thereby dampening economic vigor.
The University of Michigan’s latest preliminary survey shows growing unease among U.S. consumers, with confidence waning for the third consecutive month largely due to future economic uncertainties. Despite this, the job market and general economic conditions remain solid at present. Joanne Hsu, overseeing the survey, noted the challenges consumers face in future planning due to erratic policy changes, regardless of individual policy preferences.
The market’s focus has shifted to evaluating if the declining consumer sentiment is impacting businesses. Ulta Beauty saw a 13.7% increase after surpassing profit expectations for the quarter, although its revenue and profit forecasts did not meet analysts’ predictions. The company’s CFO, Paula Oyibo, expressed caution amid ongoing consumer uncertainty, though analysts found these forecasts more promising than anticipated.
The rally also benefited from gains in major tech companies and the artificial-intelligence sector, which were previously pressured due to concerns over inflated prices during the AI craze. Nvidia rebounded with a 5.3% rise, and Apple’s 1.8% gain mitigated its weekly losses, which had nearly mirrored the lows of the 2020 COVID-induced market crash.
In summary, the S&P 500 rose by 117.42 points to 5,638.94, the Dow Jones Industrial Average increased to 41,488.19, and the Nasdaq composite added 451.07, reaching 17,754.09.
Globally, markets in Europe and Asia saw increases. Stocks in Hong Kong and Shanghai climbed, benefitting from a Chinese financial regulatory notice encouraging consumer financial growth and support measures for borrowers, which could help boost the economy, despite calls for more comprehensive reforms.
In the bond market, Treasury yields made gains, with the 10-year Treasury yield rising from 4.27% to 4.31%, recovering from previous sharp downturns. While January saw yields near 4.80%, they’ve fluctuated with economic strength concerns and inflation risks. Overall, shifts in yields reflect ongoing economic anxieties.