US stocks rally as Federal Reserve eases rate worry, tech climbs

NEW YORK (Reuters) – US stocks rallied on Friday, lifted by gains in technology stocks and a retreat in Treasury yields as the Federal Reserve eased concerns about the path of interest rate hikes this year.

The US central bank, looking past the recent stock market sell-off and inflation concerns, said it expected economic growth to remain steady and saw no serious risks on the horizon that might pause its planned pace of rate hikes.

Investors largely expect the Fed to raise rates three times this year, beginning with its next meeting in March, the first under new chairman Jerome Powell. Traders currently see a 95.5% chance of a quarter-percentage-point hike next month, according to Thomson Reuters data.

“Certainly bond yields pulling back today is helpful for stocks, at least for the short term, that has been the narrative that is out there – that higher bond yields are weighing on stocks and this preoccupation with three percent,” said Willie Delwiche, investment strategist at Baird in Milwaukee. “So moving away from that, for today at least, provides a bid for equities.”

Powell’s first public outing will be on Tuesday, when he will testify separately before the US House of Representatives’ Financial Services Committee and the Senate Banking Committee.

The Dow Jones Industrial Average rose 347.51 points, or 1.39%, to 25,309.99, the S&P 500 gained 43.34 points, or 1.60%, to 2,747.30 and the Nasdaq Composite added 127.30 points, or 1.77%, to 7,337.39.

Benchmark 10-year US Treasury notes last rose 13/32 in price to yield 2.8714%, from 2.917% late on Thursday.

The dip in yields helped boost bond proxy sectors such as utilities, up 2.66%, and real estate, up 1.72%. The sectors have been among the worst performers so far this year on expectations of climbing rates.

Tech shares climbed 2.17% led by gains in Hewlett Packard Enterprise, which rose 10.5%, and HP Inc., up 3.5%.

The two companies created from the split of Hewlett Packard Co. in 2015 reported strong results, and HPE also announced a plan to return $7 billion to shareholders.

For the week, the Dow rose 0.37%, the S&P advanced 0.56% and the Nasdaq gained 1.35%.

Blue Buffalo Pet Products jumped 17.23% after General Mills said it would buy the natural pet food maker for $8b. General Mills was the biggest percentage decline on S&P 500, falling 3.59%.

Advancing issues outnumbered declining ones on the NYSE by a 4.54to-1 ratio; on Nasdaq, a 2.82-to-1 ratio favored advancers.

The S&P 500 posted 10 new 52-week highs and one new low; the Nasdaq Composite recorded 64 new highs and 57 new lows.

Volume on US exchanges was 6.05 billion shares, well below the 8.38 billion average over the last 20 trading days.

The Bank of Israel on Friday set its representative rate for the US dollar at NIS 3.4850, for the Australian dollar at NIS 2.7268, and for the South African rand at NIS 0.3005.

The central bank set the representative rate for the euro at NIS 4.2931, and for 100 yen at NIS 3.2612.