Stocks in the U.S. recover following a week of losses
Stock markets in the US saw a rally on Friday as investors attempted a rebound, despite a rocky week that saw all major indexes heading towards a close in the red. The Dow Jones Industrial Average surged by 1.42%, the S&P 500 rose by 1.8%, and the Nasdaq Composite gains were at 2.3%.
The rebound comes after a significant decline on Thursday, pushing the S&P 500 into what is known as 'correction territory', which is a drop of more than 10% from its recent high. This is the first time since late 2023 that the index has experienced this. In total, the benchmark index has lost approximately $5 trillion in market value since its peak in February 19, as per FactSet data.
Even with the Dow's gains on Friday, paring some of the week's losses, it was still down 3.2% by Friday midday and was on track for its worst week since March 2023. The much-needed boost came from the news that lawmakers were likely to pass a government funding plan, avoiding a shutdown. The certainty provided by this news helped boost stocks at the end of a turbulent week.
Trade tensions, mainly due to President Donald Trump's tariffs, have been a notable concern for the markets this month. However, these drawdowns can sometimes present opportunities for rebounds. According to Yung-Yu Ma, chief investment officer at BMO Wealth Management, the markets are trying to figure out where their fair value lies in the face of headwinds from tariffs, fiscal spending cuts, and potentially softening economic data.
Interestingly, consumer sentiment fell by 11% this month, reaching its lowest level since November 2022, as per a survey from the University of Michigan. Despite this negative sentiment, stocks rebounded, with tech and AI stocks like Nvidia and Palantir leading the charge. Gold, on the other hand, soared to a record high on Friday, breaking through $3,000 a troy ounce. This surge in gold prices can be attributed to investors seeking safe havens amid uncertainty around the impact of tariffs on global economic growth and geopolitical instability, such as the ongoing conflict in Ukraine.
The rebound in stock markets, such as the S&P 500 and Dow Jones Industrial Average, is a response to a week of decline, now ceasefire-ing due to favorable news like the passing of a government funding plan and avoidance of a shutdown. Despite the continued risks from trade tensions, resulting drawdowns can create opportunities for businesses that are savvy in their investing strategies despite the ongoing headwinds associated with tariffs, fiscal spending cuts, and potentially softening economic data. Meanwhile, as uncertainty persists, some investors are turning to safe assets like gold, which saw a significant rebound on Friday and broke a record high of $3,000 per troy ounce.
