Stock futures rise as indexes aim to pare weekly losses

U.S. stocks rallied Friday, shaking off some losses from earlier this week after concerns over persistent inflation and the resilience of the U.S. economy stirred up further volatility in recent sessions.

The S&P 500 rose by more than 2% intraday on Friday while the Nasdaq jumped by over 3.5% to head for its best day since mid-March. The Dow added more than 400 points. The sharp move higher came after Federal Reserve Chair Jerome Powell reaffirmed in an interview with Marketplace public radio on Thursday that two more 50 basis point rate hikes were on the table for the next two Fed meetings, and that officials were not “actively considering” a more aggressive 75 basis point hike. His comments echoed what other Fed officials also said this week.

Just a day earlier, the S&P 500 had closed within striking distance of a bear market, typically defined as a close of at least 20% from a recent record high. The index has declined by just over 18% from its Jan. 3 record high through Thursday’s close, and it paced toward a weekly drop of 4.7% if levels hold through the end of Friday’s session.

The Dow Jones Industrial Average and Nasdaq Composite each also headed for weekly losses of 3.6% and 6.4%, respectively, based on Thursday’s closing prices. Treasury yields have spiked and then pared gains back this week, with the benchmark 10-year Treasury yield hovering around 2.9% Friday morning. Bitcoin prices recovered to trade above $30,000 after setting the lowest level since Dec. 2020, as a cratering in prices of Luna further reverberated across the broader cryptocurrency market.

The market gyrations this week coincided with two major inflation reports that came in hotter-than-expected. Thursday’s Producer Price Index showed an 11% year-over-year rise in wholesale prices last month, with this rate moderating only slightly from March’s all-time high rate of 11.5%. And the Consumer Price Index released earlier this week showed a still-elevated 8.3% annual increase in prices paid by consumers last month.

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“Inflation has certainly become not only topical, but a real issue for the broader market, as the Fed has also increased its outlook for the number of [interest rate] hikes needed,” Sonali Pier, managing director and portfolio manager at Pimco, told Yahoo Finance Live on Thursday. “In terms of the effect of inflation, it’s really at this point, we’re going to see if the Fed raising rates, unwinding some of the balance sheet, can take off some of that inflation froth. Because it’s quite high, and it’s starting to impact companies — from their ability to push through from a pricing power perspective, as well as consumers, whether that’s at the gas pump or as a result of food increases and the like.”

Other strategists agreed that the Fed’s response to inflation — and how well the economy holds up as the Fed tightens financial conditions to address inflation — will be the key factor to watch going forward for the markets.

“We’re in an environment…