Wall Street stocks had their best week in three months as strong corporate earnings dampened inflation nerves.
The blue-chip S&P 500 rose 0.8 percent on Friday for a 2 percent gain over the past five days, its best weekly performance since July. Industrial and financial groups contributed to the profit. Technology-heavy Nasdaq Composite closed the session 0.5 percent higher.
Gains continued from Thursday’s trading session, which marked Wall Street’s best daily performance in eight months, as optimistic gains tempered fears of inflation.
The stock and bond markets have been plagued for weeks by concerns about rising energy prices, stalled supply chains and companies failing to pass on higher costs to consumers. Better-than-expected quarterly results from Wall Street banks and iPhone chipmaker Taiwan Semiconductor Manufacturing Company, however, have lifted the mood.
Goldman Sachs closed a great quarter for investment banking revenues, surpassing analyst expectations and raking in $3.7 billion in M&A advisory fees, up 88 percent from the prior year.
“Expectations for this earnings season were really down,” said David Stubbs, global head of market strategy at JPMorgan’s private bank. “The market is now giving this earnings season the benefit of the doubt.”
But the record investment banking fees seen all over Wall Street have boosted results amid lackluster performance in other areas, such as trading earnings, which surged in the early phases of the pandemic due to extreme market volatility.
In Europe, the regional Stoxx Europe 600 index closed 0.7 percent, representing a weekly gain of more than 2 percent. The FTSE 100 in London gained 0.4 percent.
Treasury bonds came under pressure on Friday after data showed US retail sales rose unexpectedly last month, raising bets that the Federal Reserve would withdraw some of its crisis-era support for the world’s largest economy.
The yield on the 10-year US Treasury, which moves inversely relative to price, added 0.06 percentage points to 1.57 percent.
According to the minutes of its last meeting, the Fed is poised to phase out its pandemic-era monetary stimulus, which involved buying $120 billion in government and mortgage-backed bonds a month to lower borrowing costs for businesses and households.
Futures markets are also forecasting that the Fed will raise US interest rates 0.25 percentage points from record lows by September next year.
“There is a clear possibility that markets are undervaluing monetary tightening,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management, adding that the eruption of positive sentiment around earnings could be short-lived.
Total consumer price inflation in the US is at its highest point in 13 years. Meanwhile, higher oil and coal prices, as Europe and Asia grapple with natural gas shortages, have intensified discussion that central banks will make policy mistakes by raising interest rates during an economic slowdown.
“Energy price inflation will hamper growth in Europe and Asia and that in turn will affect the rest of the world,” Drut said.
Brent oil, the oil benchmark, rose to a three-year high of $84.72 a barrel on Friday, before settling at $84.46.
Sterling rose 0.5 percent against the dollar, buying $1,374. The dollar index, which measures the US currency against six others, including the euro and sterling, was roughly flat on the day.
The British currency also gained against the Japanese yen, having bought ¥157.4 earlier in the day – the highest level since early 2016. It was last at ¥157.0. The Bank of Japan, unlike the Bank of England and the Fed, has not yet indicated that it is ready to withdraw monetary stimulus from the pandemic era.