The S&P 500 closed higher on Friday, capping a volatile week that saw the index nearly recover from a sharp selloff triggered by recession fears and the unwinding of global yen-funded carry trades. The index finished the week with a marginal decline of 0.05%, following Monday’s steep dive, which was driven by investor concerns over economic uncertainty.
Friday’s rally was fueled by gains in the technology sector, providing the biggest boost to the S&P 500. The Nasdaq Composite also closed higher, with a 0.51% increase, and the Dow Jones Industrial Average rose by 0.13%. However, despite Friday’s gains, both the Dow and Nasdaq ended the week slightly down, by 0.6% and 0.2% respectively.
The market’s volatility was reflected in the Cboe Volatility Index, often referred to as Wall Street’s “fear gauge,” which spiked at the start of the week but eased by Friday. Investors are navigating a landscape filled with uncertainty, particularly in the wake of a weaker-than-expected July jobs report that heightened recession fears and led to a significant unwinding of currency carry trade positions involving the Japanese yen.
“Investors are trying to find evidence of a bottom,” said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas. The sentiment in the market remains cautious as traders closely monitor upcoming economic data for clues on the Federal Reserve’s next move.
On Thursday, Federal Reserve officials expressed optimism that inflation is cooling sufficiently to allow for rate cuts in the near future. However, the size and timing of these cuts will depend on incoming economic data, with the next policy meeting scheduled for September 17-18. Traders are currently split on whether the Fed will opt for a 25 or 50 basis point reduction, with probabilities almost evenly divided.
Looking ahead, investors are awaiting next week’s reports on U.S. consumer prices and retail sales for July. These figures could provide further insight into the state of the economy and the likelihood of a “soft landing” as the Fed navigates its monetary policy.
Despite the recent market turbulence, all three major U.S. indexes remain solidly higher for the year, buoyed by strong earnings in tech-related megacaps and optimism surrounding artificial intelligence. Both the S&P 500 and Nasdaq have gained approximately 12% since the start of 2024.
Among individual stocks, Take-Two Interactive Software saw a 4.4% increase on Friday after the videogame publisher projected growth in net bookings for fiscal years 2026 and 2027. Meanwhile, online travel agency Expedia surged 10.2% after surpassing analysts’ expectations for second-quarter profits.
In terms of market breadth, advancing issues outnumbered decliners on the NYSE by a ratio of 1.39-to-1, while on the Nasdaq, decliners slightly outpaced advancers with a 1.14-to-1 ratio. The S&P 500 recorded 15 new 52-week highs and three new lows, while the Nasdaq Composite logged 52 new highs and 159 new lows.
As the market heads into the second half of August, all eyes will be on the upcoming economic data and the Federal Reserve’s policy decisions, which could set the tone for the remainder of the year.