Wall Street is bouncing back from significant losses earlier this week, with tech stocks regaining some ground on Friday, while Bitcoin has paused its downward trend—for now, at least.
The Dow Jones Industrial Average climbed 872 points, a 1.8% increase during midday trading. The Nasdaq Composite Index also saw a rise of 1.4%, and the blue-chip index had earlier reached a record high of 49,826.97.
The S&P 500 gained 1.3% and seems to be heading in the right direction. This marks its second rise in the last eight days.
Leading these gains were semiconductor companies, with Nvidia increasing by 4.9%. This narrowed its weekly losses, allowing it to close the day’s losses to just over 10%. Broadcom rose 3.8%, stopping its 6.3% drop this week.
These firms are crucial players in the S&P 500 index, largely due to expectations of increased spending on chips driven by advancements in artificial intelligence technology.
For instance, Amazon revealed late Thursday its plans to invest around $200 billion this year, aiming to capitalize on “significant opportunities in AI, chips, robotics, low-orbit satellites, and more.”
However, such immense spending does raise concerns, similar to issues brought up by Alphabet the previous day. The lingering question remains whether all this investment will yield valuable returns in the form of future profits. This uncertainty contributed to an 8.5% drop in Amazon’s stock price.
Despite Friday’s recovery, the S&P 500 is still poised for its third down week in four weeks. Market concerns surrounding hefty AI expenditures by major tech firms, along with fears that AI might siphon customers away from software firms, have lingered throughout the week.
Meanwhile, Bitcoin has found some stability after weeks of steep losses that saw it plummet to more than half of its October record. It briefly dipped to around $60,000 late Thursday but has since climbed to $68,000.
In the metals market, prices have also calmed after a turbulent period. Gold increased by 2% to $4,986.20 an ounce, while silver saw a slight decline of 0.3%.
After a remarkable rally driven by cautious investors amid political uncertainty, stocks unexpectedly lost traction last week. Critics have labeled the U.S. stock market as expensive and a burden on governments globally. Yet, by January, prices soared, leading to claims of unsustainability.
The recovery in Bitcoin has positively impacted stock prices for companies involved in the cryptocurrency sector. Robinhood Markets surged by 11.7%, emerging as the top gainer among the S&P 500. Coinbase Global, a trading platform for cryptocurrencies, rose by 7.3%. Companies focused on buying and holding Bitcoin saw their stock soar by 15.9%.
Additionally, shares of smaller U.S. companies outperformed many in the market, alongside those whose profitability hinges on U.S. consumer spending. This is tied to potentially uplifting data on consumer sentiment.
A preliminary survey from the University of Michigan indicated that U.S. consumer sentiment—a figure economists anticipated would dip—has experienced a slight uptick. Notably, households benefiting from the S&P 500’s record gains late last month showed the greatest improvement.
Joan Hsu, the director of consumer research, mentioned that sentiment “remains at dire levels for consumers who don’t own stocks.”
Airline stocks performed well, buoyed by hopes that an increase in consumer confidence would lead to higher travel spending. United Airlines rose by 5.4%, American Airlines by 4.6%, and Delta Air Lines increased by 4.4%.
Small-cap stocks in the Russell 2000 rose by 2.3%, significantly outperforming the S&P 500. These smaller companies tend to be more dependent on the strength of the U.S. economy compared to their larger, multinational counterparts.
Across international markets, stock indexes in most European regions experienced gains.
This positive development occurred despite a nearly 26% drop in the shares of Stellantis, the car manufacturer traded in Milan. The company announced it would take a hit of 22 billion euros ($26 billion) as it scales back on electric vehicle production. Stellantis acknowledged it had been “overestimating the pace of the energy transition” and indicated it was realigning its business to reflect customers’ actual preferences.
