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U.S. Stocks See Further Upside After Early Rebound

wallstreet oct01 12aug22 lt

Stocks moved mostly higher in early trading on Friday and have seen further upside over the course of the session. The major averages have climbed firmly into positive territory following the significant downturn seen in the previous session.

Currently, the major averages are just off their highs of the session. The Dow is up 276.01 points or 0.8 percent at 33,612.68, the Nasdaq is up 166.84 points or 1.3 percent at 12,946.75 and the S&P 500 is up 44.15 points or 1.1 percent at 4,251.42.

The markets continue to benefit from recent upward momentum, which has lifted the major averages well off their June lows to their highest levels in three months.

Optimism that inflation has peaked has also contributed to the continued strength on Wall Street following this week's tamer than expected readings on consumer and producer prices.

Adding to the positive sentiment about inflation, the Labor Department released a report showing U.S. import prices fell by more than expected in the month of July.

The Labor Department said import prices slumped by 1.4 percent in July after rising by an upwardly revised 0.3 percent in June. The decrease reflected the first drop in import prices since December 2021.

Economists had expected import prices to decline by 1.0 percent compared to the 0.2 percent uptick originally reported for the previous month.

The report also showed export prices tumbled by 3.3 percent in July after climbing by 0.7 percent in June. Export prices were expected to decrease by 1.1 percent.

Buying interest was also generated in reaction to a report from the University of Michigan showing consumer sentiment in the U.S. has improved by much more than expected in the month of August.

The report showed the consumer sentiment index jumped to 55.1 in August from 51.5 in July. Economists had expected the index to inch up to 52.5.

With the bigger than expected increase, the consumer sentiment index continued to recover after hitting a record low 50.0 in June.

The University of Michigan also said one-year inflation expectations dipped to 5.0 percent in August from 5.2 percent in July, while five-year inflation expectations crept up 3.0 percent from 2.9 percent.

Surveys of Consumers Director Joanne Hsu noted one-year inflation expectations fell to the lowest level since February but were still well above the 4.6 percent reading from a year ago.

Sector News

Semiconductor stocks continue to see substantial strength in afternoon trading, resulting in a 2.5 percent spike by the Philadelphia Semiconductor Index. The index continues to recover following the sharp pullback seen earlier this week.

Considerable strength also remains visible among gold stocks, as reflected by the 2.3 percent jump by the NYSE Arca Gold Bugs Index.

The rally by gold stocks comes amid a modest increase by the price of the precious metal, with gold for December delivery rising $6.60 to $1,813.80 an ounce.

Airline stocks are also turning in a strong performance on the day, driving the NYSE Arca Airline Index up b y 1.9 percent. The index is on pace to end the session at a two-month closing high.

Networking, chemical and computer hardware stocks are also seeing notable strength in afternoon trading, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index surged by 2.6 percent following a holiday on Thursday, while China's Shanghai Composite Index dipped by 0.2 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index advanced by 0.7 percent, the U.K.'s FTSE 100 Index rose by 0.5 percent and the French CAC 40 Index inched up by 0.1 percent.

In the bond market, treasuries have regained ground after pulling back sharply over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.9 basis points at 2.859 percent.

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