by Stan Choi
Wall Street returned on Friday led by companies that would benefit most from a healthy economy, but that wasn’t enough to save the stock market from its worst week since winter.
The S&P 500 rose 49.50, or 1.1%, to 4,357.04 after another early morning trade. It fluctuated between a 0.4% loss and a 1.6% gain throughout the day.
The Dow Jones Industrial Average climbed 482.54 points, or 1.4%, to 34,326.46, and the Nasdaq Composite rose 118.12, or 0.8%, to 14,566.70.
Merck helped propel the market and jumped 8.4% as it halved its experimental pill to treat COVID-19, halving hospitalizations and deaths. The prospects of an additional tool for overcoming the pandemic helped lift stocks of airlines, hotels and companies hurt by restrictions on travel and other activities.
United Airlines jumped 7.9%, casino owner Caesars Entertainment 6.4% more and Live Nation Entertainment 8.3%.
Energy producers, financial companies and other businesses whose profits are often tied to the strength of the economy were also helping to lead the way.
The broad gains of the market were not enough to make up for the gloomy conditions of the past few days. The S&P 500 still fell in a weekly loss of 2.2%, its worst since February. A sharp rise in interest rates earlier this week shocked the market and forced a re-evaluation of whether stocks have become too expensive, especially the most popular ones.
On Friday, the yield on the 10-year Treasury fell to 1.46% from 1.52% late Thursday. It is still well above the level of 1.32% a week and a half ago.
September was also the worst month for the S&P 500 since March 2020, when markets fell as the COVID-19 shutdown took hold. Amid weighted concerns on the market: The Federal Reserve is close to shutting down the accelerator on its support for markets, mixed economic data after recent spurt in COVID-19 infections, could increase corporate tax rates And the political turmoil continues in Washington.
There also high inflation is still engulfing the world. Oil prices rose nearly 2% this week, hitting a seven-year high, while natural gas prices were up nearly 7%.
The Federal Reserve has said it expects high inflation to be only fleeting and is the result of an economy coming 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 the markets telegraph.
The economic report on Friday was mixed. The country’s construction rose faster than expected last month, but the August reading for the Federal Reserve’s preferred measure for inflation was slightly higher than forecast. They follow a disappointing report on Thursday in which more people than expected have filed for unemployment benefits.
Such data means “you hear the word ‘stagflation’ come up all at once, which will be the worst outcome,” said Rich Weiss, chief investment officer for multi-asset strategy at American Century Investments.
Stagflation occurs when economic growth stagnates but inflation remains high. Weiss doesn’t expect that to happen unless the pandemic causes more global shutdowns, but he’s also not positioning his investments like he’s optimistic about big future gains for stocks.
“We’re not swinging on the pitch right now,” he said. “We are neutral.”
Weiss said the market would need to fall by about a third before it could call the stock attractively priced where interest rates are now, all else being 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 nearly three-year highs.
Japan’s Nikkei 225 index fell 2.3% and South Korea’s Kospi fell 1.6%.
European stock indices also fell.
AP Business Writer Elaine Kurtenbach contributed.