Market Snapshot: U.S. stocks end sharply higher, Dow snaps four straight weeks of losses amid signs of a resilient economy

How stocks traded

• The Dow Jones Industrial Average
  DJIA,
  +1.17%
  gained 387.40 points, or 1.2%, to close at 33,390.97.

• The S&P 500
  SPX,
  +1.61%
  rose 64.29 points, or 1.6%, to finish at 4,045.64.

• The Nasdaq Composite
  COMP,
  +1.97%
  jumped 226.02 points, or 2%, to end at 11,689.01.

What drove markets

Gains in the U.S. stock market on Friday accelerated into the close, with the S&P 500 snapping a three-week losing streak, as investors weighed how aggressively the Federal Reserve may need to hike interest rates to bring inflation under control.

“Wall Street has had a lot of Fed speak to digest over the past week, but it seems clear that traders believe we are very close to the peak despite all these signs of a resilient economy,” Edward Moya, senior market analyst at Oanda, wrote in a Friday afternoon note.

James Solloway, chief market strategist and senior portfolio manager at SEI Investments Co., remains cautious about the stock market.

“The improvement that we’ve seen in the past two days merely offsets what has been some severe weakness in the last couple of weeks,” Solloway said in a phone interview Friday. “There’s a fair amount of uncertainty out there right now.”

Stocks pulled back in February, denting a strong start to 2023, as a run of hotter-than-expected jobs and inflation data saw investors reassess expectations for how high the Fed will drive interest rates in a bid to get inflation under control. Investors have worried the Fed’s monetary policy may need to be tighter for longer to tame sticky inflation, lifting bond yields this week.

Stocks held on to gains Friday after the Institute for Supply Management said its services index held steady at a robust 55.1% in February, showing the U.S. economy is still in expansion mode even as headwinds pick up.

“Consumers are still spending money,” said Keith Apton, a managing director at UBS Wealth Management, in a phone interview Friday. “You still have unemployment that’s stubbornly low.”

But Apton expects “there’s going to be a better entry point in the market later this year,” with the S&P 500 potentially falling to 3,800. Consumers have been dipping into their savings and with the Fed still raising rates, he said, “I’m telling clients to brace for a mild recession in the third quarter of this year.”

Apton said he currently likes large-cap value stocks and has a sector preference for defensive areas of the market such as healthcare and utilities. He said he also likes international equities, including developed and emerging markets, and will be watching for potential economic stimulus from the Chinese government’s legislative session this weekend.

U.S. stocks have climbed this week as a measure of market volatility fell. The CBOE  Volatility Index
VIX,
-5.62%
has declined more than 14% this week to 18.5 on Friday, FactSet data show, at last check. That’s below its long-run average of around 20.

For the week, the S&P 500 gained 1.9%, while the Dow Jones Industrial Average rose 1.7% and the technology-heavy Nasdaq Composite advanced 2.6%, according to Dow Jones Market Data.

Equities generally have been in “a broad trading range,” SEI’s Solloway said. “We are at the upper end of that range right now.”

Companies in focus

• C3.ai Inc. shares
  AI,
  +33.65%
  surged more than 33% after the enterprise artificial intelligence software group delivered well-received results and upbeat forecasts.

• Zscaler Inc.
  ZS,
  -11.10%
  shares sank 11.1% after the cloud cybersecurity company forecast a decline in billings and announced layoffs in a statement after the market closed on Thursday.

• Shares of Marvell Technology Inc.
  MRVL,
  -4.74%
  fell 4.7% after the chip company met expectations with results for its latest quarter but blamed inventory corrections for an outlook that came in below the consensus view.

Movers & Shakers: C3.ai stock surges but ChargePoint and Zscaler shares dive

––Steve Goldstein contributed to this article.