By STAN CHOE (AP Business Writer).
NEW YORK (AP) — Wall Street is tacking a bit more onto its stupendous surge from a day before in Friday morning trading, keeping it on track for a strong gain for the week.
The S&P 500 was 0.6% higher a day after soaring 5.5% in what was its best day since the spring of 2020. The Dow Jones Industrial Average dropped 41 points to 33,674, or 0.1%, after soaring more than 1,200 points the day before. However, the Nasdaq composite was 1.2% better as of 10 :21 Eastern time.
Markets got a boost after China relaxed some of its strict anti-COVID measures, which have been hurting the world’s second-largest economy. The hope for greater economic growth in China has helped stocks and oil prices rise. U.S. crude rose more than 4 percent to $90 per barrel.
Thursday’s huge rally for Wall Street came after a report showed inflation in the United States slowed by more than expected last month. The report raised hopes that the worst inflation is over and that the Federal Reserve could take a less aggressive approach to raising interest rates. But economists and analysts warned that high inflation could continue to be more stubborn than anticipated on the way down. Stock prices can be affected by increases in such rates, which could lead to a recession.
It is just as important as how bad the inflation is right now to consider how much it will be in the future. That’s because too-high expectations could trigger a vicious cycle where people accelerate purchases and make other moves that only inflame inflation further.
The Fed stated it closely follows such expectations, and that preventing a doom-loop is one reason it has been so aggressive in increasing rates. Recent inflation expectations were relatively high, but not enough to cause panic at Federal Reserve. A preliminary report on Friday suggested U.S. households aren’t moving those expectations very much.
According to a University of Michigan survey, the median household expectation of inflation for the next year rose to 5.1% from 5% one month earlier. The University of Michigan found that long-run inflation expectations rose to 3%. But that’s still within the same 2.9% to 3.1% range where it’s been for 15 of the last 16 months.
The Fed has already increased its overnight interest rate to a range from 3.75% to 4.4%. This is an increase from the zero level in March. The Fed is expected to raise rates further in the next year, before holding them at this level for a while.
The market hopes that a milder inflation could mean that the Fed will maintain a lower, more painful level of interest for the markets.
CME Group says traders now believe that the rate will rise to around 4.75%-5% by next year. They expected a higher final rate, which was a large chunk of traders expecting to see as high as 5.25% to 5.5% a week ago.
In observance Veterans Day, the bond markets will be closed to trading. Yields plummeted on Thursday as investors reduced their expectations of how aggressively Fed would raise rates.
The S&P 500 is heading for its third weekly gain in the last four, and its rise of 5.5% is on track to be its biggest since June.
In the crypto market, meanwhile, prices are sinking again amid the industry’s latest crisis of confidence. FTX was one of the biggest crypto trading platforms and filed for bankruptcy protection. Users began to panic about its financial strength and started pulling their money out.
The exchange and its founder are under investigation by the Department of Justice and Securities and Exchange Commission, and rivals have said FTX’s failure could dent confidence in the entire system.
According to CoinDesk, Bitcoin dropped below $16,900, or 4.6%, from the day before. Its record of almost $69,000 was set nearly exactly one year ago. It was also above $21,000 a week earlier.