Wall Street rebounded on Friday, led by companies that would benefit most from a healthier economy, but not by enough to keep the stock market from its worst week since the winter.
The S&P 500 rose 49.50, or 1.1%, to 4,357.04 following another choppy day of trading. It swung between a loss of 0.4% and a gain of 1.6% through the day.
The Dow Jones Industrial Average climbed 482.54 points, or 1.4%, to 34,326.46, and the Nasdaq composite gained 118.12, or 0.8%, to 14,566.70.
Merck helped pace the market and leaped 8.4% after it said its experimental pill to treat COVID-19 cut hospitalizations and deaths by half. Prospects for an additional tool to tame the pandemic helped lift shares of airlines, hotels and companies hurt by restrictions on travel and other activities.
United Airlines soared 7.9%, casino owner Caesars Entertainment swept 6.4% higher and Live Nation Entertainment jumped 8.3%.
Energy producers, financial companies and other businesses whose profits are often closely tied to the economy’s strength were also helping to lead the way.
The market’s widespread gains weren’t enough to make up for a dismal last few days. The S&P 500 still dropped to a weekly loss of 2.2%, its worst since February. A swift rise in interest rates earlier this week rattled the market and forced a reassessment of whether stocks had grown too expensive, particularly the most popular ones.
On Friday, the yield on the 10-year Treasury fell back to 1.46% from 1.52% late Thursday. That’s still well above its perch of 1.32% from a week and a half ago.
September was also the worst month for the S&P 500 since March 2020, when markets plunged as COVID-19 shutdowns took hold. Among the worries that have weighed on the market: The Federal Reserve is close to letting off the accelerator on its support for markets, economic data has recently been mixed following an upturn in COVID-19 infections, corporate tax rates may be set to rise and political turmoil continues in Washington.
There’s also high inflation still enveloping the world. Oil prices rose roughly 2% this week, approaching a seven-year high, while natural gas prices were up about 7%.
The Federal Reserve has said that it expects high inflation to be only transitory and that it’s the result of an economy roaring back to life from its earlier shutdown. But if it’s wrong, the Fed may have to raise interest rates earlier or more aggressively than it’s telegraphed to markets.
Economic reports on Friday were mixed. The nation’s manufacturing grew faster than expected last month, but an August reading for the Federal Reserve’s preferred measure for inflation was a bit higher than forecast. They follow a disappointing report on Thursday showing more people filed for unemployment benefits than expected.
Such data means “you hear the word ‘stagflation’ come up once in a while, which would be the worst outcome” said Rich Weiss, chief investment officer of multi-asset strategies at American Century Investments.
Stagflation is when economic growth stagnates but inflation remains high. Weiss doesn’t expect that to happen, so long as the pandemic doesn’t cause more global shutdowns, but he also is not positioning his investments as if he’s optimistic about big future gains for stocks.
“We’re not swinging at the pitch right now,” he said. “We are neutral.”
Weiss said the market would need to fall by about a third before he’d call stocks attractively valued based on where interest rates are now, all else equal.
Asian stock markets fell earlier in the day, despite Japan’s lifting of a pandemic state of emergency and a survey of large Japanese manufacturers showing sentiment at a nearly three-year high.
Japan’s Nikkei 225 index slumped 2.3%, and South Korea’s Kospi fell 1.6%.
European stock indexes also fell.