Wall Street closed the week with impressive gains, as major U.S. indexes bounced back strongly after a week full of volatility. Investors were confronted with a volatile market driven by a series of chaotic swings, largely influenced by the ongoing trade war between the U.S. and China, as well as the start of the first-quarter earnings season. Despite the turbulence, the market ended Friday on a positive note, fueled by a mix of economic data, reassurances from the Federal Reserve, and investor optimism surrounding the earnings reports from major banks.
All three major U.S. indexes – the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite – registered solid gains at the close of the session. The rally came after comments from Federal Reserve officials, including Boston Federal Reserve President Susan Collins, who offered assurances that the central bank was prepared to step in and keep financial markets functioning should the need arise. These reassurances helped to calm investor nerves and provided much-needed stability to the market.
The week had been marked by significant volatility, with Wall Street enduring wild price swings, particularly in response to the latest developments in the trade war between the U.S. and China. The U.S. recently escalated tensions by raising tariffs on Chinese imports to an effective rate of 145%, prompting retaliatory actions from Beijing. This intensification of the trade dispute contributed to uncertainty in the market, causing investors to second-guess their positions and leading to intraday price fluctuations. Additionally, a brief tariff reprieve for European goods added to the complexity of market sentiment, further exacerbating volatility.
Despite these disruptions, the market managed to rebound sharply by the end of the week, as investors sought signs of stability. The S&P 500 and the Dow Jones both posted their largest weekly percentage gains since November 2023, while the Nasdaq Composite saw its biggest weekly advance since November 2022. This marked a strong comeback for the market after a tumultuous period.
The market’s performance was also impacted by the ongoing uncertainties surrounding inflation, trade tensions, and broader economic growth. Greg Bassuk, CEO of AXS Investments, observed that investors are currently caught in a "tug of war" trying to balance concerns about inflation and the trade war with hopes for economic recovery. "Uncertainty and volatility are the new investor narrative," he said. "The table is set for more volatility ahead, and this week's roller coaster ride could be just foreshadowing for what's ahead."
Economic data provided mixed signals, further contributing to the uncertainty. On one hand, inflation appeared to be cooling, with the Labor Department’s Producer Price Index (PPI) unexpectedly falling by 0.4% in the most recent report, suggesting that inflationary pressures may be easing. This was seen as a positive development by many investors who were hoping for signs that inflation might be under control.
However, other data pointed to growing concerns about consumer sentiment. A separate report revealed that consumer expectations for inflation over the next year surged to 6.7%, the highest level since 1981. This spike in inflation expectations raised concerns that rising prices could dampen consumer spending and economic growth in the near term.
Despite these inflationary concerns, Federal Reserve officials such as New York Federal Reserve President John Williams emphasized that the U.S. economy is not on the brink of stagflation—a condition characterized by stagnant economic growth and high inflation. Williams assured investors that the Fed would take necessary actions to prevent such a scenario from occurring and to maintain stable economic conditions. His comments helped to reassure the market that the Fed was closely monitoring inflation and would act as needed to ensure long-term stability.
The first-quarter earnings season also began with solid results, with analysts now projecting an aggregate earnings growth of 8.0% for the S&P 500 in the first quarter, down from the 12.2% growth forecast at the beginning of the quarter. This downward revision reflected concerns over the broader economic slowdown, particularly the negative impact of the trade war on global growth. Nevertheless, earnings from major banks and other companies provided some optimism, as investors eagerly awaited more results from key sectors.
The market's rebound was also driven by strong performance across all 11 sectors in the S&P 500, with materials and technology leading the charge. The Dow Jones Industrial Average surged 619.05 points, or 1.56%, to close at 40,212.71. The S&P 500 gained 95.31 points, or 1.81%, ending at 5,363.36, while the Nasdaq Composite advanced 337.15 points, or 2.06%, closing at 16,724.46. These gains signaled that investors were ready to look beyond the uncertainties and focus on the potential for future growth.
In a note to clients, Citi revised its year-end target for the S&P 500, lowering it to 5,800 from an earlier forecast of 6,500. The bank cited concerns about the ongoing trade war, which continues to create significant uncertainty, as well as signs of a slowing economy. Citi’s revised target reflects the broader market concerns that the trade conflict may drag on longer than expected and further weigh on economic growth.
Despite the challenges, the market’s overall strength was evident. Advancing issues outnumbered decliners by a 2.47-to-1 ratio on the New York Stock Exchange (NYSE), and there were 60 new highs and 341 new lows on the NYSE. On the Nasdaq, 2,948 stocks rose, while 1,467 declined, with advancing issues outnumbering decliners by a 2.01-to-1 ratio. This market breadth suggests that investor sentiment remains generally positive despite the volatility.
Overall, trading volume on U.S. exchanges reached 19.19 billion shares, slightly above the 18.74 billion average for the past 20 trading days. This strong volume reflects heightened investor participation amid the continued market uncertainty. As the trade war, earnings season, and inflation concerns continue to play out, Wall Street is likely to remain in a state of flux, with investors closely monitoring developments for signs of stabilization or further disruption.
