The S&P 500 climbed 0.7% on Friday, clawing back part of a sell-off tied to rising Treasury yields, but the index still headed for a weekly decline of more than 1%. Fundstrat's Tom Lee says he still expects the S&P to hit new records by the end of August.
Indices rebound, but weekly losses still loom
The S&P 500 climbed 0.7% on Friday, matching a 0.7% gain on the Nasdaq Composite, as investors tried to find their footing after a steep sell-off driven by rising Treasury yields. The Dow Jones Industrial Average added 476 points, or 0.9%, supported by gains in healthcare stocks such as Merck and Johnson & Johnson.
Yet the rebound isn't enough to erase the week's damage. The S&P 500 is on track to snap a three-week winning streak with a decline of more than 1%, while the Nasdaq is off by nearly 2% and also poised to end its own three-week win streak. The Dow has fallen around 1% on the week, putting it on track for back-to-back weekly losses. The downturn reached beyond U.S. markets too, with the MSCI All Country World Index tracking a weekly decline of almost 1%.
Treasury yields keep pressuring stocks
Bonds have come under pressure as investors fear rising inflation tied to higher oil prices, and that pressure resumed Thursday after the government tried to stem a Treasury market sell-off. On Friday, longer-dated yields added to that rise, with the 10-year Treasury note yield gaining more than 3 basis points to 4.732%. The 30-year Treasury bond yield advanced more than 3 basis points as well to 5.268%.
Leo Kelly, founder and CEO at Verdence Capital Advisors, said equities could see further declines if yields keep climbing. According to CNBC: "The market has adjusted to 4% to 5%" on the 10-year yield, but a break toward the 6% to 7% range would be a problem, he said. Investors are now looking to next week's Jackson Hole speech from Federal Reserve Chairman Kevin Warsh for more clarity on yields, as well as on central bank independence.
Tom Lee sees the S&P back at records by month-end
Elsewhere, financials got a lift as crypto-related stocks jumped alongside bitcoin's rally, with Robinhood shares up 12% and Coinbase adding 9%. Materials also outperformed, up 2% on the day.
Fundstrat Global Advisors founder Tom Lee expects the S&P 500 to reach new records by the end of August, even though the index sits almost 2% below its Aug. 13 closing all-time high of 7,798.99. Lee said he expects the index to return to a range of 7,900 to 8,000 by month-end, pointing to the absence of a Federal Reserve meeting this month, a weaker-than-expected July jobs report, and cooling July inflation as catalysts. He also cited a strong second-quarter earnings season and an improving 2027 forecast outlook as additional tailwinds.
Source: CNBC
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