Stock Market Today: Wall Street hits the closing bell broadly in the green on Friday

Wall Street's main indexes close in the green to wrap up the week.
Tech stocks rose, Utilities took a knee.
Markets lean toward a Fed rate cut in June after inflation data.

Following Friday's risk appetite recovery, the S&P 500 (SPX) index rose 0.80% to close the session at 5,137.09. The Dow Jones (DJIA) climbed 0.23% to end at 39,087.38, while the Nasdaq (IXIC) gained 1.14% to finish at 16,274.94.

Stock market news

The Technology Sector climbed 1.78% on Friday, outperforming the rest of the market sectors, closely followed by the Energy Sector which gained 1.17%. The Utilities Sector fell on Friday, ending the week down 0.72% at the closing bell.

NetApp Inc. (NTAP) jumped 18.167% to close at $105.31 as the biggest gainer on Friday. On the other hand, Zscaler Inc. (ZS) backslid nearly 9.4% as the biggest loser for the day, dropping to $219.23.

Inflation in the US, as measured by the change in Personal Consumption Expenditures (PCE) Price Index, declined to 2.4% on a yearly basis in January, the US Bureau of Economic Analysis (BEA) reported on Thursday. This reading followed the 2.6% increase recorded in December and came in line with the market expectation. On a monthly basis, the PCE Price Index rose 0.3% as forecast. The Core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, matching analysts' estimates.

The CME FedWatch Tool shows that markets are pricing in a nearly 70% probability that the Federal Reserve (Fed) will lower the policy rate by 25 basis points in June.

The data from the US showed on Friday that the ISM Manufacturing PMI declined to 47.8 in February from 49.1. This reading missed the market expectation of 49.5 and highlighted ongoing contraction in the manufacturing sector's business activity.

Nasdaq FAQs

What is the Nasdaq?

The Nasdaq is a stock exchange based in the US that started out life as an electronic stock quotation machine. At first, the Nasdaq only provided quotations for over-the-counter (OTC) stocks but later it became an exchange too. By 1991, the Nasdaq had grown to account for 46% of the entire US securities’ market. In 1998, it became the first stock exchange in the US to provide online trading. The Nasdaq also produces several indices, the most comprehensive of which is the Nasdaq Composite representing all 2,500-plus stocks on the Nasdaq, and the Nasdaq 100.

What is the Nasdaq 100?

The Nasdaq 100 is a large-cap index made up of 100 non-financial companies from the Nasdaq stock exchange. Although it only includes a fraction of the thousands of stocks in the Nasdaq, it accounts for over 90% of the movement. The influence of each company on the index is market-cap weighted. The Nasdaq 100 includes companies with a significant focus on technology although it also encompasses companies from other industries and from outside the US. The average annual return of the Nasdaq 100 has been 17.23% since 1986.

How can I trade the Nasdaq 100?

There are a number of ways to trade the Nasdaq 100. Most retail brokers and spread betting platforms offer bets using Contracts for Difference (CFD). For longer-term investors, Exchange-Traded Funds (ETFs) trade like shares that mimic the movement of the index without the investor needing to buy all 100 constituent companies. An example ETF is the Invesco QQQ Trust (QQQ). Nasdaq 100 futures contracts allow traders to speculate on the future direction of the index. Options provide the right, but not the obligation, to buy or sell the Nasdaq 100 at a specific price (strike price) in the future.

What Factors Drive the Nasdaq 100

Many different factors drive the Nasdaq 100 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the Nasdaq 100 as it affects the cost of credit, on which many corporations are heavily reliant. As such the level of inflation can be a major driver too as well as other metrics which impact on the decisions of the Fed.

Assessing the latest developments in financial markets, “with positive month-end sentiment dominating the end of yesterday’s session, it was not only the S&P 500 eking out yet another all-time high, but there was also a new record high for the NASDAQ (+0.90%), which moved above its previous peak from November 2021,” said Jim Reid, global head of economics and thematic research at Deutsche Bank, and continued:

“Consistent with the narrative of the year so far, the Magnificent 7 outperformed (+1.22%), with Amazon (+2.08%) and Nvidia (+1.87%) leading the way. The equity picture had been more subdued in Europe, where the STOXX 600 ended the day unchanged, although the German DAX (+0.44%) continued to outperform yesterday. Indeed, yesterday’s advance was the 7th consecutive gain for the DAX, taking the index up to a fresh all-time high.”

Atlanta Fed President Raphael Bostic said on Thursday that it might be appropriate to start reducing rates in summer. San Francisco Fed President Mary Daly argued that cutting rates too quickly could cause inflation to get stuck and Cleveland Fed President Loretta Mester noted that they can't expect last year's disinflation to continue.

Earlier in the week, the BEA downwardly revised the annualized Gross Domestic Product (GDP) growth of the US in the fourth quarter to 3.2% from 3.3% in the initial estimate.

Inflation FAQs

What is inflation?

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

What is the Consumer Price Index (CPI)?

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

What is the impact of inflation on foreign exchange?

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

How does inflation influence the price of Gold?

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

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