200819 Wall STreet
A sign for a Wall Street building is shown in New York. Image Credit: AP

New York: Wall Street stocks closed sharply higher on Friday, ending several days of sell-offs with a rebound fueled by upbeat earnings, strong economic data and waning fears of a larger-than-expected interest rate hike by the Federal Reserve.

All three major US indexes posted solid gains, with financials leading the charge in the wake of Citigroup Inc’s earnings beat. This reversed Thursday’s sell-off driven by downbeat guidance from rivals JPMorgan Chase and Morgan Stanley.

Even so, all three indexes ended below last Friday’s close, as markets were spooked by hot inflation data out on Wednesday.

“We’re still below the downward sloping trend line,” said Sam Stovall, chief investment strategist of CFRA Research in New York. “One day does not a new trend make.” Consumer prices in June showed the highest annual growth rate since 1981, raising chances that the Fed could raise its key fed funds target rate by 100 basis points, steeper than the 75 basis point hike previously expected.

“(Investors) would be unnerved by a 100 basis point rate hike, as it would imply that the Fed does not know what it is doing and is being controlled by the data,” Stovall added.

Those fears were calmed by remarks from Fed officials on Thursday and Friday, which indicated an interest rate increase of 75 basis points is likely in the cards.

Economic data released on Friday surprised to the upside, with stronger-than-expected retail sales, an uptick in consumer sentiment, lower inflation expectations and cooling import prices.

“Economic indicators are not consistent right now,” said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York. “They are positive and negative, which shows we’re in a period of transition.

According to preliminary data, the S&P 500 gained 71.18 points, or 1.88 per cent, to end at 3,861.56 points, while the Nasdaq Composite gained 202.60 points, or 1.80 per cent, to 11,453.78. The Dow Jones Industrial Average rose 655.83 points, or 2.14 per cent, to 31,286.00.

Second-quarter earnings season is well underway, with 35 of the companies in the S&P 500 having reported. Of those, 80 per cent have beaten Street expectations, according to Refinitiv.

Analysts now expect aggregate year-on-year S&P 500 second-quarter profit growth of 5.6 per cent, down from the 6.8 per cent estimate at the beginning of the quarter.

Citigroup bucked the trend among big bank earnings reports as its quarterly profit beat expectations, sending the stock surging.

Wells Fargo & Co reported its quarterly profit nearly halved due to increased loan loss provisions and weak mortgage business. Still, its shares posted a solid advance on the day.

Unitedhealth Group Inc ended the session higher after the healthcare company raised its annual profit forecast for the second straight quarter.

BlackRock Inc gained ground even after the world’s largest asset manager posted a steeper-than-expected profit drop.

Market participants now look to next week’s full ledger of scheduled earnings releases, from Goldman Sachs Group Inc, Bank of America Corp, International Business Corp, Netflix Inc, Tesla Inc, Twitter Inc and assorted heavy-hitting industrials.