Wall St rebounds, but yield surge sets stage for weekly losses

The main U.S. stock indexes rose on Friday after a drubbing in the previous session, though markets were still on track to end the week lower as elevated government bond yields and geopolitical tensions weakened risk tolerance.

The S&P 500 and the tech-heavy Nasdaq were set to snap a three-week winning streak, while the Dow was headed for a second consecutive weekly loss and its steepest weekly decline since mid-March.

On Friday, financial stocks provided the biggest boost to the market, with big banks JPMorgan Chase and Goldman Sachs up 1.2% and 2.3%, respectively. The S&P 500 banks index rose 1.1%.

Retail-investor platform Robinhood advanced 12.4%. Crypto exchange operator Coinbase Global gained 9.5% and bitcoin-hoarder Strategy rose 7.4% as bitcoin touched its highest mark since late May.

Most megacap and growth stocks were also higher, with Meta and Tesla up over 1% each.

Tech stocks are set to underperform peers this week, hammered by a surge in longer-dated Treasury yields. Concerns over ballooning government debt, higher financing costs and persistent inflation fears had pushed up 30-year Treasury bond yields to a 19-year high on Tuesday.

U.S. Treasury Secretary Scott Bessent’s announcement on Thursday that the government could further increase its Treasury repurchases after Wednesday’s surprise intervention provided short-lived respite.

Paul Stanley, managing director and founding advisor at Arca, said the massive bond market was pricing off a stronger economy and higher inflation, so the relief was temporary.

“It is another brick in the market’s wall of worry and ultimately, the market will likely resume its focus on the promise of AI and how companies are using this productivity to drive earnings,” he said.

At 09:50 a.m. ET, the Dow Jones Industrial Average rose 361.71 points, or 0.68%, to 53,119.88, the S&P 500 was up 29.02 points, or 0.39%, to 7,670.18, and the Nasdaq Composite gained 49.29 points, or 0.19%, to 26,116.66.

Ross Stores added 4.2% after the value retailer raised its annual profit forecasts and reported better-than-expected second-quarter results.

However, Bessent said the United States will impose “the toughest sanctions in history” on Iran, a move he suggested would lessen the need for new major military operations, keeping risk appetite in check.

The impasse between Washington and Tehran has meant oil prices are higher, though they dipped slightly on Friday.

UBS Global Wealth Management raised its year-end target for the S&P 500 to 8,100, citing a stronger earnings outlook and robust corporate profit growth.

A flash estimate of the S&P Global purchasing managers’ index survey stood at 53.2 for August, compared with an estimate of 53.9, according to economists polled by Reuters.

Eyes on Warsh, AI bellwether Nvidia

Attention will now turn to next week’s personal consumption expenditures data, the U.S. Federal Reserve’s preferred inflation gauge, following tame inflation readings last week that knocked down bets of an imminent central bank rate hike.

Fed Chair Kevin Warsh’s speech at the Jackson Hole symposium will also be watched, while Nvidia is scheduled to report quarterly earnings next week, in the next test of the AI trade.

Advancing issues outnumbered decliners by a 2.45-to-1 ratio on the NYSE and by a 2.23-to-1 ratio on the Nasdaq.

The S&P 500 posted four new 52-week highs and two new lows, while the Nasdaq Composite recorded 34 new highs and 33 new lows.