Tech Shares Lift NASDAQ Composite as Treasury Yields Retreat

The major U.S. stock indexes rallied on Friday amid heightened volatility as U.S. Treasury yields eased and economic data encouraged investors to look beyond the growing likelihood that the Federal Reserve will have to keep its restrictive interest rate hiking campaign until at least the end of 2023.

On Friday, the blue-chip Dow Jones Industrial Average settled at 33390.97, up 387.40 or +1.17%. The benchmark S&P 500 Index finished at 4045.64, up 64.29 or +1.61%, and the tech-weighted NASDAQ Composite closed at 11689.01, up 226.02 or +1.97%.

In addition to the daily results, all significant averages posted a winning week. The Dow closed up 1.75% to snap a four-week losing streak. The S&P 500 finished up 1.90%, its first positive week in the last four. The NASDAQ ended the week 2.58% higher.

Falling Treasury Yields Set the Tone

Demand for U.S. equities rose on Friday as Treasury yields eased from multi-month and multi-year highs in some cases as investors assessed the cumulative impact from Fed rate hikes already implemented while digesting this week’s Fed official comments that seemed to lean toward the less-hawkish side.

Triggering today’s rally was a dip in the yield on the benchmark 10-year Treasury note, which fell below the critical 4% threshold. Investors have been eyeing 4% as the fundamental level on the 10-year that could trigger another leg lower in stocks. Throughout the week, stocks retreated when the 10-year rate nudged above that point.

The 10-year Treasury is the benchmark rate that influences mortgages and car loans, so a breakout in the yield could ripple through the economy.

Fed Official Comments and Data Help Shift Sentiment

A boost in sentiment on Thursday carried over to Friday’s session. Setting a bullish tone were comments from Atlanta Fed President Raphael Bostic, who said he thinks the central bank can keep its interest rate hikes at 25 basis points rather than the half-point increase favored by some other officials.

Economic data released on Friday showed steady demand for services, with purchasing managers’ indexes (PMI) from the Institute for Supply Management and S&P Global indicating that activity in the sector continues to expand even as input prices cool.

Sectors and Stocks on the Move

All 11 major sectors of the S&P 500 ended the session green, with tech and consumer discretionary enjoying the most significant percentage gains.

Apple Inc jumped 3.5% after Morgan Stanley said the stock could rally more than 20% this year on a potential hardware subscription.

Broadcom Inc advanced 5.7% after the chipmaker forecasted second-quarter revenue above analysts’ estimates as increased investments in AI spurred demand for chips.

Among the losers, Costco Wholesale Corp slipped 2.1% on the heels of its revenue miss, as high inflation dampened consumer demand.

Finally, chipmaker Marvell Technology Inc slid 4.7% because of the company’s quarterly profit miss and disappointing revenue forecast.