NEW YORK (AP) — A broad-based rally in stocks on Wall Street on Friday capped an eventful week in which stocks that had been left behind during much of this year’s record rally recaptured the spotlight from market leaders.
The S&P 500 rose 1.1% to its highest in seven weeks after 3M Co. and several other major companies reported spring profits that beat analysts’ expectations. The Dow Jones Industrial Average rose 654 points, or 1.6%, and the Nasdaq Composite rose 1%.
The market’s broad rally included gains for both big tech companies and smaller names, a departure from recent trading that saw a widening gap between the elite few stocks that have dominated the market for much of the year and just about everyone else.
Nvidia rose 0.7%, paring its loss for the week to 4.1%. Most other stocks in a small group of stocks known as the “Magnificent Seven” also rose, clawing back some of the losses they saw earlier in the week.
The Magnificent Seven stocks came under pressure after Tesla and Alphabet’s latest earnings reports sparked concerns that investors may have gotten carried away with enthusiasm for artificial intelligence technology and overpaid for their shares. The sheer size of these stocks has been a major factor in driving the S&P 500 to dozens of new all-time highs this year, masking weakness in the rest of the market.
As the big tech stocks at the top of the market leaderboard fell, previously struggling sectors of the market rallied, and that momentum continued on Friday. The Russell 2000 index of small-cap stocks rose 1.7%, bringing its gain to 10.4% so far this month, well above the roughly flat performance of the S&P 500’s larger stocks.
Industrial companies and other businesses whose profits are closely tied to the strength of the economy also rose, after they struggled earlier this year under the weight of high interest rates aimed at taming inflation.
Norfolk Southern Railway Co. rose 10.9% after erasing losses so far this year and reporting a profit for its latest quarter that beat analysts’ expectations. An insurance payout related to last year’s disastrous East Palestine derailment boosted the company’s shares. The company also made progress in cutting costs and improving efficiency.
3M shares rose 23% after it reported profit and revenue for its latest quarter that beat analysts’ expectations. The company, which makes Scotch-Brite and Nexcare brands, also raised the lower end of its profit forecast range for the full year 2024.
Market watchers have been hoping for such a larger rally because a market with many rising stocks is considered healthier than one driven by a small, controlling elite.
Stocks rose broadly following Friday’s latest inflation report, reinforcing investor hopes of upcoming interest rate cuts.
The Commerce Department said Friday that American consumers paid 2.5% more in June than the same month a year ago, down from May’s inflation rate of 2.6%. This is based on the personal consumption expenditures index, which the Federal Reserve focuses on more than the consumer price index (CPI).
With inflation slowing again after a sluggish start to the year, traders are pricing in a 100% chance that the Fed will begin easing its key interest rate in September, according to CME Group data, as the central bank keeps its federal funds rate at its highest in more than two decades.
“Income growth is sluggish, spending growth is slowing, commodity prices are deflationary and services price inflation is moderate,” said Brian Jacobsen, chief economist at Annex Wealth Management. “If this doesn’t give the Fed confidence to cut rates, nothing will.”
The yield on the 10-year Treasury note fell to 4.19% from 4.25% at Thursday’s close, down from 4.70% in April, a big move for the bond market and one that will support stocks.
Among other gainers on Wall Street, where about 90% of stocks in the S&P 500 rose, Deckers Outdoors rose 6.3% after it handily beat Wall Street profit expectations on the back of strong sales of its UGG and Hoka brand shoes. The California company also raised its full-year profit forecast.
Newell Brands, which owns Coleman camping gear and Sharpie markers, easily beat analysts’ profit targets, sending its shares soaring 40.5%.
Fewer stocks fell, including Dexcom, which fell 40.7%. The diabetes care company reported better-than-expected profits for its most recent quarter, but revenue fell short of analysts’ expectations. Revenue estimates for the current quarter also fell short.
Overall, the S&P 500 rose 59.88 points to 5,459.10, the Dow added 654.27 points to 40,589.34 and the Nasdaq Composite added 176.16 points to 17,357.88.
Overseas stock indexes rose in much of Europe and Asia, while Japan’s Nikkei index fell an unusual 0.5 percent on expectations that the Bank of Japan may raise interest rates at its policy meeting next week.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
