U.S. stocks end higher, S&P 500 books longest weekly win streak since August 2022 after bear-market exit

What drove markets

U.S. stocks finished higher Friday, with the S&P 500 booking a modest weekly gain, as investors looked ahead to the Federal Reserve’s upcoming policy meeting.

The S&P 500 exited bear-market territory on Thursday by closing 20% above last year’s trough in October. Although Wall Street cheered the milestone after a long, painful bear market, some are cautious about the technical exit.

Read: S&P 500 exits longest bear market since 1948. What stock-market history says about what happens next.

“We advise investors against assuming that the recent upswing in equities can gain momentum,” said Solita Marcelli, chief investment officer for the Americas, at UBS Global Wealth Management, in a note Friday. “Until markets reach a new all-time high, it’s impossible to know whether the bear market trough — the ultimate low of the market cycle — is behind us.”

James Demmert, CIO at Main Street Research, was also cautious.

“Even though the S&P 500 is up just over 20% from the October 2022 low, that does not mean the bear market is over yet,” Demmert said in emailed commentary Friday. “The bear markets of 2000 and 2008 both saw rallies in excess of 20%, which did not constitute the end of the bear market, as the market experienced further downside after those rallies.”

Read: ‘Too soon to price in a recovery’: Here’s Citi Global Wealth’s investing strategy for a bear market that it says is not over yet

Friday was relatively quiet, with little economic data, as investors turned their attention to next week when May inflation data and policy decisions from the Federal Reserve and European Central Bank are due.

Fed-funds futures on Friday were pointing to a 71.2% probability that the central bank will announce at the conclusion of its two-day policy meeting on June 14 that it’s pausing its interest-rate increases, according to the CME FedWatch Tool, at last check. Traders saw a 28.8% chance of a quarter-point rate hike by the Fed.

The Fed has been raising rates to combat high inflation.

The consumer-price index showed that inflation eased to a year-over-year rate of 4.9% in April, down from last year’s peak of 9.1% in June. The CPI reading for May will be released on Tuesday.

“Inflation is going in the right direction,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management, in a phone interview Friday. “I think we’ve seen the last of the rate increases.”

See: Fed might hike interest rates again in June instead of a ‘skip,’ some economists think

Also read: Odds of U.S. ‘hard landing’ rising after Fed’s refusal to pause rate hikes earlier this year, warns Cam Harvey

Five of the S&P 500’s 11 sectors closed higher Friday, with information technology posting the strongest performance with a 0.5% gain, according to FactSet data. The materials sector had the biggest decline, down 0.8%.

The Cboe Volatility Index
VIX,
+1.32%,
known as the Vix, was trading around 13.8 on Friday, below its long-run average of about 20 after hitting its lowest level since February 2020.

In One Chart: Here’s the main driver of the S&P 500’s bull-market rally, according to Fundstrat’s Tom Lee

The Vix, also known as the stock market’s fear gauge, is “pretty low,” said Ma.

“We’re still getting the recession that continues to perpetually be six months away,” he said. The market is making “somewhat of a valiant attempt to climb a wall of worry here.”

Companies in focus

• Tesla Inc.
  TSLA,
  +4.06%
  and General Motors Co.
  GM,
  +1.06%
  shares rose after the automakers said owners of GM’s electric vehicles will have access to Tesla’s fast-charging network in North America starting next year. Tesla gained 4.1% while GM’s stock rose 1.1%.

• DocuSign Inc. shares
  DOCU,
  -2.50%
  dropped 2.5% after executives warned of smaller deal sizes and expansion rates.

• Planet Labs PBC
  PL,
  -30.41%
  plunged more than 30% after the Earth-imaging company reported a narrower quarterly loss, but called for lower-than-expected revenue for its fiscal 2024.

• Salesforce Inc.
  CRM,
  +2.76%
  shares advanced 2.8%, a sharp gain that placed the company’s stock among the best performers on the S&P 500 on Friday.

Jamie Chisholm contributed.