The main indexes opened higher Friday and stayed there through the close. Bargain hunters rushed in to buy the dip following another down week for stocks, with market participants brushing off another concerning reading on consumer sentiment.
Reports that Congress will pass a spending bill to avert a government shutdown also lifted the mood across Wall Street.
At the close, the Dow Jones Industrial Average was up 1.7% at 41,488, the S&P 500 was 2.1% higher at 5,638, and the Nasdaq Composite had gained 2.6% to 17,754. Still, all three indexes closed lower on a weekly basis, with losses ranging from 2.3% to 3.1%.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
The Nasdaq‘s outperformance on Friday came as several beaten-down mega caps bounced. Nvidia (NVDA), for one, gained 5.3% to lead the 30 Dow Jones stocks. Microsoft (MSFT, +2.6%), Apple (AAPL, +1.8%) and Amazon.com (AMZN, +2.1%) also rallied.
Tesla chimes in on tariffs
And Tesla (TSLA) rose 3.9% even after Wells Fargo reiterated its Underperform (Sell) rating on the consumer discretionary stock and lowered its price target to $130 from $135 – nearly 50% below Friday’s closing price. Analysts cited weakening fundamentals, slowing sales and margin pressures as near-term risks.
Separately, Elon Musk’s electric vehicle company sent a letter to U.S. Trade Representative Jamieson Greer earlier this week regarding the Trump administration’s tariffs.
“While Tesla recognizes and supports the importance of fair trade, the assessment undertaken by USTR [U.S. trade representative] of potential actions to rectify unfair trade should also take into account exports from the United States,” the company wrote, adding that retaliatory tariffs expose U.S. exporters to “disproportionate impacts when other countries respond to U.S. trade actions.”
Tesla said that certain trade actions “could result in the imposition of cost-prohibitive tariffs on necessary components” that “are difficult or impossible” to get in the United States.
Gold tops $3,000
Gold was another area of the market that saw positive price action today as the precious metal capitalized on its safe-haven status. Gold futures settled up 0.3% at $3,001 an ounce – their first-ever close above the psychologically significant $3,000 mark.
That’s good news for investors in these gold ETFs that have seen the price of the precious metal rise by nearly 14% this year.
Consumer sentiment slumps
Echoing this risk-averse frame of mind was Friday morning’s release of the University of Michigan Consumer Sentiment Index, which slumped to 57.9 in March from February’s 64.7.
The results showed that “expectations for the future deteriorated across multiple facets of the economy, including personal finances, labor markets, inflation, business conditions, and stock markets,” with consumers citing uncertainty related to “policy and other economic factors.”
The report also showed that year-ahead inflation expectations jumped to 4.9% from 4.3% in February, the highest level since November 2022. Long-run inflation expectations surged to 3.9% from 3.5%, marking the biggest month-over-month increase since 1993.
This pullback in confidence creates a “real threat to consumer spending,” which accounts for two-thirds of the U.S. economy, says Bill Adams, chief economist for Comerica Bank. “People who are afraid the economy is headed into a ditch won’t buy new cars or houses, go out to eat, or go on vacations.”
Adams adds that the Fed is unlikely to “ride to the rescue” if consumer spending drops “at the same time that inflation expectations are soaring.”
Next week’s Fed meeting is a big one
That makes the next Fed meeting, slated to kick off Tuesday, even more important, if that’s at all possible.
The central bank is widely expected to keep interest rates unchanged. But Wall Street will focus on the release of the Fed’s Summary of Economic Projections, or “dot plot,” which summarizes what each member expects monetary policy to be going forward, as well as Powell’s presser for clues on the central bank’s plans moving forward.
A team of Wells Fargo economists led by Jay Bryson expects the dot plot to signal expectations for two quarter-point rate cuts by year’s end – one fewer than futures traders are currently pricing in.
As for Powell, the group believes he will stick to his data-dependent script. However, a modest uptick in downside risks to the labor market could prompt Powell to potentially “make a dovish content or two … that reveal a slight easing bias,” they add.