U.S. stock indexes rose on Friday after falling for two days, as investors looked past hawkish comments from a top Federal Reserve official that had fanned fears of aggressive interest rate hikes from the central bank.
St. Louis Fed President James Bullard said on Thursday the U.S. central bank needed to keep raising interest rates given that its tightening so far “had only limited effects on observed inflation”
Comments from Bullard, a voting member of the rate-setting committee this year, which came on the back of strong retail sales data had stoked concerns that the central bank would stick to its aggressive stance against inflation.
“Initially when that (Bullard commentary) came out, you saw the market sell off and then there was some discussion about was he being over-reactive?” said Kenny Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.
“The rate increases that we’ve had over the last six months haven’t really had time to completely filter through the system and we’re going to see more of it filter over the next couple of months.”
Equities had seen strong gains last week after a softer-than-expected inflation report boosted hopes of smaller rate hikes from the Fed.
Traders still largely expect the central bank to hike interest rates by 50 basis points in December and see rates peaking at 5.02% in June next year. .
On Friday, Federal Reserve Bank of Boston leader Susan Collins also said the central bank has more rate hikes ahead of it, echoing views of several other central bank policymakers.
The benchmark S&P 500 (.SPX) and the Nasdaq (.IXIC) have lost 17% and nearly 29%, respectively, so far this year on worries that the Fed’s aggressive rate hikes could push the economy into a recession.
At 10:24 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 128.87 points, or 0.38%, at 33,675.19, the S&P 500 (.SPX) was up 11.34 points, or 0.29%, at 3,957.90, and the Nasdaq Composite (.IXIC) was up 10.57 points, or 0.09%, at 11,155.52.
Energy segment (.SPNY) fell about 2% as oil prices declined on concerns about weakening demand in China. .
Gap Inc jumped 7.2% after the retailer surpassed quarterly sales and profit estimates, helped by steady demand despite a surge in inflation.
The S&P index recorded six new 52-week highs and no new low, while the Nasdaq recorded 34 new highs and 60 new lows.