Stocks rally as Wall Street closes in on rare winning week

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NEW YORK (AP) — Stocks are climbing again on Friday, and the lull for Wall Street’s brutal sell-off this year…

NEW YORK (AP) — Stocks are climbing again on Friday, and the lull for Wall Street’s brutal sell-off this year has the S&P 500 heading for just its second winning week in the last 12.

The S&P 500 was 1.5% higher in early trading. It’s on pace for a 4.9% gain for the week, though it’s still roughly 20% below its record set early this year and hasn’t recouped its loss from the prior week, which was its worst since the early days of the 2020 coronavirus crash.

The Dow Jones Industrial Average was up 387 points, or 1.3%, at 31,064, as of 9:50 a.m. Eastern time, and the Nasdaq composite was 2% higher.

Stocks have climbed this week as pressure from rising Treasury yields lets up somewhat and investors speculate the Federal Reserve may not be as aggressive about raising interest rates as earlier thought.

It’s been a reprieve from Wall Street’s tumble through most of the year, as the Fed and other central banks slam into reverse on the tremendous support they fed into markets through the pandemic. In hopes of beating down punishingly high inflation, central banks have raised interest rates and made other moves that hurt prices for investments and threaten to slow the economy enough to cause a recession. More such moves are sure to come.

Parts of the U.S. economy are still red-hot, particularly the jobs market, but some discouraging signals have emerged recently. One lowlight this week was preliminary data suggesting U.S. manufacturing and services sectors aren’t as strong as economists thought.

Such weakening data raise worries about the strength of the economy. But they also can be good for financial markets, as paradoxical as that may seem.

The weakness could mean less upward pressure on inflation, which would ultimately mean the Federal Reserve doesn’t have to raise rates so aggressively. And interest rates drive trading for everything from stocks to cryptocurrencies.

Last week, the Fed hiked its key short-term rate by the biggest margin since 1994 and said another such increases could be coming, though they wouldn’t be common.

Since the Fed’s meeting last week, investors have been modestly ratcheting back their expectations for how high the Fed will hike interest rates by the end of the year.

That’s helped yields in the Treasury market recede. The yield on the two-year Treasury, which tends to move with expectations for the Fed’s actions, has dropped back to 3.08% from more than 3.40% in the middle of last week, though it rose Friday.

The yield on the 10-year Treasury, which sets the bedrock of the world’s financial system, rose to 3.09% on Friday from 3.07% late Thursday. But it’s also moderated after coming close to 3.50% last week.

Earlier this year, it more than doubled after starting 2022 a little above 1.50%.

Wall Street’s gains were part of a global rally on Friday.

London’s FTSE 100 added 1.7% after Prime Minister Boris Johnson suffered a double blow as voters rejected his Conservative Party in two special elections dominated by questions about his leadership and ethics.

Tokyo’s Nikkei 225 added 1.2% as a report showed inflation in Japan remained at 2.1% in May. After stripping out costs for energy and fresh food though, underlying inflation remained at 0.8%. And Japan’s central bank is unlikely to follow the example of the Fed and other central banks in raising interest rates, analysts said.

___

AP Business Writer Elaine Kurtenback contributed from Bangkok.

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© 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, written or redistributed.

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