BRUISING WEEK ENDS ON HIGH NOTE
Apple leads widespread rally; bank stocks recover
Apple was at the head of a widespread rally on Wall Street Friday after the market’s most influential company reported a better profit than expected. Stocks of beaten-down banks also leapt to recover a smidgen of their sharp losses from a brutal week.
The S&P 500 jumped 1.8 percent, though it still turned in a modest loss for the week that was its worst in nearly two months. The Dow climbed 546 points, or 1.7 percent, while the Nasdaq rallied 2.2 percent.
Treasury yields jumped in the bond market after a report showed hiring accelerated across the economy by much more than expected last month. The U.S. government’s jobs report also showed workers won bigger pay raises in April than expected.
While that’s good news, particularly when many economists fear a recession may arrive this year, the data also raises worries inflation may stay high and push the Federal Reserve to keep interest rates higher. That in turn would keep the pressure up on an already slowing economy.
The data did little to narrow the extremely wide range of possibilities for the economy that investors are forecasting for the economy, from a painful recession to a soft landing, said Bill Northey, senior investment director at U.S. Bank Wealth Management.
“Today’s jobs report likely gave both the bulls and the bears something to anchor around,” he said.
High interest rates have already caused cracks in the U.S. banking system, and fears about what may be next to fall have rocked the industry. This week began with regulators seizing First Republic Bank, which became the third large U.S. bank failure to hit since March.
Investors have been hunting for the next possible weak link in the system and driving down stock prices for those seen at risk of a sudden exodus by customers. That’s even as banks protested that they were seeing deposit levels stabilize or strengthen. Several of the hardest hit recovered some of their steep losses Friday, adding to the ebullient mood.
PacWest Bancorp. soared 81.7 percent, though it still lost 43.3 percent for the week. Western Alliance Bancorp. jumped 49.2 percent to trim its loss for the week to 26.8 percent.
The worry is falling stock prices for banks could create a vicious cycle that causes customers to lose faith and pull their deposits, which then raises more fear for the system.
Apple didn’t rise as much as those banks Friday, but its moves pack a more potent punch. Apple is the most valuable stock on Wall Street, which gives its moves outsized weight on the S&P 500 and other indexes.
Its 4.7 percent gain made it the biggest force by far lifting S&P 500. The iPhone maker reported a drop in earnings and revenue, but the results nevertheless topped analysts’ muted expectations.
The story has been similar across the broader market for results during the first three months of the year. Analysts came into this earnings reporting season with low expectations given high interest rates and a slowing economy, but the majority of companies have done better than feared.
Live Nation Entertainment jumped 15 percent after reporting a more modest loss than analysts expected.
On the losing end was Lyft, which slumped 19.3 percent after it gave a weaker financial forecast for the current quarter than Wall Street expected. It’s a contrast to competitor Uber, which rose solidly for the week following its earnings report.