S&P 500 notches its first winning week in past four

Stocks rallied Friday to send Wall Street to its best day in six weeks.

The S&P 500 rose 1.6% to cap its first winning week in the past four as relaxing yields in the bond market took some pressure off Wall Street. It’s found some stability after a swift rise and fall to start the year.

The Dow Jones Industrial Average climbed 1.2%, while the Nasdaq composite jumped 2%.

The central guidepost moving markets recently has been where inflation is heading and what the Federal Reserve will do about it.

“I’d love to talk about other things, but the only things that matter are the Fed and trajectory of inflation,” said Amanda Agati, chief investment officer at PNC Asset Management.

Early in the year, Wall Street rallied on hopes that cooling inflation would get the Fed to take it easier on its rate increases. Such increases can drive down inflation by slowing the economy, but they also raise the risk of a recession and hurt prices for investments.

Last month, momentum swung and stocks fell after reports on the economy came in hotter than expected. They included data on the jobs market, consumer spending and inflation at multiple levels.

The strong data raised concerns about continued upward pressure on inflation. That forced Wall Street to abandon hopes for rate cuts this year and raise its expectations for how high rates could go.

On Friday, more data showed up to reveal that the economy is in better shape than thought. Growth for services industries last month was a touch stronger than economists expected. That’s a good sign for the economy and helps calm worries about an imminent recession, particularly when manufacturing has been struggling. But it also is expected to add pressure on inflation.

Instead of sending stocks lower and yields higher as stronger-than-expected data did much of last month, markets reacted in the opposite way.

The yield on the 10-year Treasury fell back to 3.96% from 4.06% late Thursday. It’s a respite from its shot higher over the last month as expectations rose for a firmer Fed.

Under the surface of the services report were some potentially encouraging bits for inflation. Prices are still rising for prices paid by services organizations, but the growth decelerated in February.

“We started off the year with a delusional, deranged or even unhinged market rally that just made no sense at all,” Agati said. “That delusion is still sitting in the background clearly, even though we are starting to get some of that reality check.”

She sees the Fed having to take interest rates even higher than the market is expecting because of how stubborn inflation has been. With corporate profits on the way down and her expectation for even more declines because of a mild to moderate recession, she sees the stock market grinding lower before plateauing for a while and then gradually rising again.

“It’s going to be a more extended tightening cycle,” Agati said. “Investors are so conditioned to high volatility and warp speed, they want everything to happen immediately. You see the market trying to price it in one shot. It’s just going to take longer for the Fed to get out of the driver’s seat.”

Costco Wholesale on Friday reported stronger profit for its latest quarter than expected, but its revenue fell short of forecasts. Shares of the company fell 2.1%.

Shares of Silvergate Capital, a bank for crypto companies, swung sharply a day after more than halving. Crypto companies have been cutting off business with the bank, which warned earlier this week that it won’t be able to file its annual report with regulators in time and that it could be “less than well-capitalized.” After swinging from losses to gains, shares of the company ended the day 0.9% higher.

On the winning side was Cooper Cos., a medical devicemaker that reported stronger profit and revenue than Wall Street expected. Shares of the company climbed 7.3%.

Broadcom gained 5.5% after it also beat expectations for quarterly profit and revenue.

All told, the S&P 500 rose 64.29 points to 4,045.64. The Dow gained 387.40 to 33,390.97 and the Nasdaq jumped 226.02 to 11,689.01.