First American News LLC-Raleigh, NC: The stock market capped a turbulent week by rallying Friday, as investors furiously shifted bets on how the Federal Reserve will proceed with interest-rate increases in the wake of Russia’s invasion of Ukraine.
Investors bought the dip across markets over the last two days, wading back into risky assets from shares of rapidly growing companies to bitcoin. They poured about $3.6 billion into U.S. stock exchange-traded funds alone for the week through Thursday, with more than $3 billion going into the broad SPDR S&P 500 ETF Trust, according to FactSet.
The gains pushed indexes sharply higher, undoing much of the damage stocks suffered following Russia’s incursion into Ukraine earlier in the week. The S&P 500 ended up adding 0.8% for the four-day trading week. However, the broad benchmark remained stuck in a correction after tumbling more than 10% from its January high on Tuesday.
The Nasdaq Composite ended up adding 1.6% over the last four days, while the Dow Jones Industrial Average clawed itself out of a big loss, ending the week roughly flat.
Bitcoin, meanwhile, gained 1.6%, as the cryptocurrency neared $40,000. Oil prices fell. Investors sold bonds, pushing the yield on the benchmark 10-year U.S. Treasury back near 2%. Other safe-haven assets, such as gold and silver, fell.
Despite the rebound, investors say they are bracing for further turbulence. Even after Moscow suggested it was open to negotiations, which helped send the stock market higher Friday, Kyiv came under renewed bombing and land attacks.
“I do not think that this highly volatile period is already coming to an end,” said Daniel Egger, chief investment officer at St. Gotthard Fund Management. “Right now we have to focus on what’s happening in Kyiv, how bloody the coming days will be, and I would say definitely the Russian sanctions still can be stepped up.”
On Friday, the Dow Jones Industrial Average added 834.92 points, or 2.5%, to 34058.75. It was the Dow’s best day since November 2020. The S&P 500 gained 95.95 points, or 2.2%, to 4384.65. The Nasdaq Composite advanced 221.04 points, or 1.6%, to 13694.62.
Some analysts and investors said the end-of-week rally had more to do with investors pricing in expectations that the Fed will take a less aggressive path on interest-rate increases. Several said they believe the conflict in Ukraine adds too much uncertainty to the economic picture, making a 0.25% rate increase more likely next month rather than the 0.50% increase some officials had previously suggested.
“Ultimately, the long-term path for risk assets will remain broadly unaltered,” said Seema Shah, chief strategist at Principal Global Investors. “A modest path higher—but one that could be hit with significant volatility and uncertainty.”
Stocks initially appeared set for major losses this week. On Monday, while markets were closed for a holiday, Russian President Vladimir Putin deployed troops into an eastern region of Ukraine. Stocks sold off sharply Tuesday as investors pondered how the fighting, its effect on commodity markets and retaliatory Western sanctions would ripple through a world economy already grappling with elevated inflation and coming interest-rate increases by major central banks.
By Tuesday’s close, the S&P 500 shed 1%, leaving it down more than 10% from its early-January record in its first correction in more than two years. The selling continued into Wednesday and most of Thursday as Russia began its invasion of Ukraine. However, stocks staged a turnaround midday Thursday after President Biden outlined additional sanctions on Russia.
Other markets have also been roiled by the conflict. Before falling Friday, oil prices reached their highest level in nearly a decade. Wheat futures also have surged.
So far, investors have responded positively to stiffening restrictions on Russian companies and individuals, with markets either recovering some losses or rallying after the unveiling of sanctions this week. Given the scale of Moscow’s attack, investors are preparing for potentially stricter restrictions, such as cutting off Russia from vital international financial infrastructure.
Most sectors of the stock market registered gains over the week. Technology stocks, which have played a major role in the market’s twists and turns in recent sessions, added 1.3% over the last four trading days, with Google parent Alphabet rising 3.1% over that span.
The utilities, healthcare, and real-estate sectors all added more than 2% over the week, with manufacturers and material firms edged higher. Consumer staples, consumer discretionary firms, and financial firms all notched minor weekly losses despite participating in Friday’s rally.
Stocks rebounded overseas. Russia’s Moex stock-market gauge, which tumbled Thursday, rose around 19%. Russia’s ruble gained almost 3% to trade at 82 a dollar, having shed almost 8% Thursday.
The Stoxx Europe 600 rose 3.3% but remained down 1.6% for the week. Japan’s Nikkei 225 rose 1.9%, and the CSI 300, which comprises the largest stocks listed in Shanghai and Shenzhen, both rose 1% after falling Thursday. Hong Kong’s Hang Seng Index slipped 0.6%.
Futures for Brent crude, the global oil benchmark, edged down 1% to $94.45 a barrel, while European natural-gas prices retreated by more than one-fifth after rocketing Thursday. Brent topped $100 a barrel early Thursday before falling back.
Rapid inflation and the prospect of tighter monetary policy were complicating the outlook for some traditional safe-haven assets such as Treasury bonds, the U.S. dollar, and gold, said Yung-Yu Ma, chief investment strategist for BMO Wealth Management in the U.S.
In bond markets, the yield on the benchmark U.S. 10-year Treasury note rose to 1.984% from 1.969% Thursday. Yields and prices move inversely. Gold prices slipped 2% to $1,886 a troy ounce.
“It looks like the military action in Ukraine could be protracted,” said Mr. Ma, adding that this would make short-term market movements difficult to predict.