Stocks extend Friday gains and head for winning week as Dow jumps 700 points

I would not be surprised if 10-year Treasury yields move higher, says Strategas CEO Jason Trennert

Stocks climbed in choppy trading on Friday as investors assessed more corporate earnings reports and the outlook for Federal Reserve rate hikes.

The Dow Jones Industrial Average gained 727 points, or 2.4%. The S&P 500 rose 2.3%. The Nasdaq Composite was up 2.2%.

Treasury yields fell from their highs on Friday morning after a report from the Wall Street Journal that some Fed officials are concerned about overtightening with large rate hikes. That report appeared to boost equities as well.

The central bank’s aggressive rate hikes have been a major factor in stocks falling into a bear market this year, and traders have continued raising their estimates of where the Fed will stop.

“We really need a Fed pause. Not so much that they would just outright disavow future rate hikes, but that they would just say every meeting is live, and if the data go our way then after the first half of ’23 we don’t have to do more,” said Stifel chief equity strategist Barry Bannister on “Squawk on the Street.”

Even with Friday’s bond market reversal, the 10-year Treasury yield is still trading above 4.2%, a level last seen in 2008. Still, the major equity averages are up more than 4% on the week.

“I think at the end of last week market’s got a little bit oversold technically. And as we’ve seen so many times in the past, when things get negative enough it becomes some sort of a contrarian indicator for a bounce,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.

“But like every other bounce we’ve had, it hasn’t been very well sustained. … A bounce today doesn’t necessarily mean it’s going to continue into next week. If it does, I suspect it won’t be more than a day or two,” Frederick added.

Bank stocks were a bright spot on Friday, with Goldman Sachs gaining 4.5% and JPMorgan Chase adding 4.7%.

Earnings reports limited gains for the market. Dow components American Express and Verizon fell 2.8% and 4.4%, respectively, after their quarterly reports. In tech, social media company Snap fell 31% after reporting a quarterly revenue of $1.13 billion, below expectations.