The Dow Jones Industrial Average rebounded on Friday from a fourth straight day of losses on Thursday.
The Dow rose 210 points. The S&P 500 rebounded 0.6% and the Nasdaq Composite gained 0.6%.
In the vacation-shortened week, the Dow is down 0.8% and is on track for its second consecutive negative week. The S&P 500 is back about 0.4% this week while the Nasdaq Composite is 0.1% lower.
September is historically a weak month for stocks, and investors have continued to consistently sell stocks after a weak August job report a week ago on Friday raised questions about the state of the economic recovery amid the Covid resurgence.
Several airlines lowered their forecasts on Thursday, citing weak travel demand because of the Delta variant. The US has the same number of new Covid cases on average as it did in January.
But stocks related to the economic recovery rebounded on Friday, with airlines and energy stocks rising in pre-trading hours. Delta Air Lines and American Airlines acted in the green. Cyclical factors like Boeing and FedEx were also higher in pre-trading.
Wells Fargo shares rose 2% early on the market after the bank announced it ended the CFPB Consent Order related to its 2016 sales practices, removing an overhang on the stock.
President Joe Biden stiffened his stance on vaccinating Americans Thursday, outlining a plan to oblige Covid vaccines for millions. Federal employees must be given a Covid vaccine, and the president is calling on the Department of Labor to require employers with more than 100 employees to prescribe vaccines or weekly tests.
“Ultimately, we’re seeing stocks end strongly in September,” Fundstrat’s Tom Lee wrote in a client note late Thursday. “Delta variant seems to be organically slowing down … The White House plan is really hammering to contain COVID-19.”
Biden’s phone conversation with Chinese President Xi Jinping on Friday, during which the two world leaders spoke for the first time since February, also contributed to the positive market sentiment.
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The Federal Reserve opens a two-day session on September 21, and the Street will be on the lookout for an update on the Fed’s bond-buying program. On Thursday, the European Central Bank left its monetary policy unchanged but said it would slow the pace of its asset-buying program.
Hot inflation complicates matters and could lead the Fed to abandon its loose inflation-lowering policy as the economy slows, creating fears of stagflation among investors. The August Producer Price Index, released on Friday, showed that wholesale costs for businesses rose 8.3% on a yearly basis, the largest increase since at least 2010. The PPI accelerated 0.7% for the month, outperforming the Dow. Jones estimate of 0.6%.
The more important consumer price index for August will be released on Tuesday.
“The pace of monetary policy changes will be gradual enough not to affect the economic recovery or the equity rally, while the disparities between the more restrictive and cautious central banks will create opportunities,” said Mark Haefele, chief investment officer of UBS Global Wealth Management.
“We expect the major central banks to continue to support growth and keep rates low for longer. This is positive for equity markets, especially for cyclical and high-value areas of the market,” he added.
The big averages are still hovering around their all-time highs. The Dow is about 2% below its record, while the Nasdaq and S&P are about 1% off theirs.
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