By Lewis Krauskopf, Sruthi Shankar and Anisha Sircar
(Reuters) - Wall Street's main indexes jumped more than 2% on Friday as signs of slowing economic growth and a recent pullback in commodity prices tempered expectations for the Federal Reserve's rate-hike plans and set stocks on course for strong weekly gains.
All 11 S&P 500 sectors were up strongly, with financials, materials and industrials leading the way.
Financial markets have been roiled on worries that rapid rate hikes by the Fed to rein in 40-year-high inflation could cause a recession. Investors have been gauging when the market might hit its bottom after the benchmark S&P 500 earlier this month recorded a 20% drop from its January closing peak, confirming the common definition of a bear market.
"Some of the moves, the sellers just get exhausted so you don’t have as much capital moving out," said Shawn Cruz, head trading strategist at TD (TSX:TD) Ameritrade.
"This might be a little bit of a relief rally," Cruz said. "But I think I would not encourage anyone to start going in with both hands at the moment, because we have seen this repeatedly where these things can reverse themselves pretty quickly."
The Dow Jones Industrial Average rose 687.08 points, or 2.24%, to 31,364.44, the S&P 500 gained 92.79 points, or 2.44%, to 3,888.52 and the Nasdaq Composite added 268.59 points, or 2.39%, to 11,500.79.
U.S. consumer sentiment fell to a record low in June, but Americans saw a marginal improvement in the outlook for inflation, a survey showed on Friday. Data on Thursday pointed to slowing U.S. business activity in June.
Helping ease inflation fears was a sharp drop in commodity prices this week. The Refinitiv/CoreCommodity Index, which measures prices for energy, agriculture, metals and other commodities, fell to a roughly two-month low on Thursday after hitting a multi-year peak earlier in June.
"Crude oil coming down is maybe a little bit of a glimmer of hope that inflation can at least moderate," Cruz said.
Fed funds futures traders are now pricing for the benchmark rate to rise to about 3.5% by March, down from expectations last week that it would increase to around 4%.
Bank stocks rallied, with the S&P 500 banks index up 3.6%, after the Fed's annual "stress test" exercise showed that the lenders have enough capital to weather a severe economic downturn.
In company news, FedEx Corp (NYSE:FDX) shares jumped 7% after the parcel delivery company issued a stronger-than-expected full-year profit forecast.
Advancing issues outnumbered declining ones on the NYSE by a 5.88-to-1 ratio; on Nasdaq, a 2.66-to-1 ratio favored advancers.
The S&P 500 posted 1 new 52-week high and 29 new lows; the Nasdaq Composite recorded 29 new highs and 49 new lows.