Wall St set for weekly gains on signs of cooling inflation

© Reuters. FILE PHOTO: Traders work on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 8, 2022. REUTERS/Andrew Kelly/File Photo

By Bansari Mayur Kamdar and Aniruddha Ghosh

(Reuters) - Wall Street's main indexes rose on Friday, setting the S&P 500 and the Nasdaq for a fourth straight week of gains on easing bets of another super-sized interest rate hike on evidence of cooling inflation.

The S&P 500 is up 16% from its mid-June low, with the latest boost coming from a slower-than-expected rise in consumer prices and a surprise drop in producer prices in July.

The benchmark index briefly crossed a closely watched technical level of 4,231 points, indicating it has recovered 50% of its bear market loss.

"The economy is not falling off a cliff, but there are some troubling signs. Still, the bulls can point to a very strong jobs market and corporate earnings that did not suggest a slowdown was hurting company profits," said Lindsey Bell, chief markets and money strategist at Ally.

"Stocks big and small have recovered impressively in the last two months despite a very mixed bag of economic data."

While policymakers remain firm about a further tightening in monetary policy until inflation pressures fully abate, traders see a 63.5% chance of the Fed raising rates by 50 basis points next month instead of a 75 basis points hike. [FEDWATCH]

The Fed has raised its policy rate by 225 basis points since March as it battles to cool demand without sparking a sharp rise in layoffs.

Ten of the 11 major S&P 500 sectors advanced in early trading, with communication services and information technology stocks leading the gains.

High-growth and technology stocks such as Apple Inc (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL) rose 0.8% each as investors returned to riskier assets and Treasury yields dipped after a volatile week. [US/]

Growth stocks have underpeformed their value counterparts so far this year on worries that rising Treasury yields due to aggressive rate hikes will pressure their valuation.

Investors bought $7.1 billion in equities in the week to Wednesday, according to a Bank of America (NYSE:BAC) note, with U.S. growth stocks recording their largest weekly inflow since December last year.

"The major indices are trading near highs going back to May and June and those highs are now serving as near-term resistance," said Adam Sarhan, chief executive of 50 Park Investments.

Meanwhile, banks edged 0.3% lower but were still on track to extend their rally for sixth straight week.

Data showed U.S. consumer sentiment ticked further up in August from a record low this summer and American households' near-term outlook for inflation eased again on easing gasoline prices.

At 10:09 a.m. ET, the Dow Jones Industrial Average was up 99.94 points, or 0.30%, at 33,436.61, the S&P 500 was up 22.64 points, or 0.54%, at 4,229.91, and the Nasdaq Composite was up 98.18 points, or 0.77%, at 12,878.09.

After a rough start to the year, better-than-expected second quarter earnings from corporate America have supported the upbeat sentiment for U.S. equities.

Of the 456 S&P 500 companies that have reported earnings so far, 77.6% have topped profit expectations, as per Refinitiv data.

Rivian Automotive Inc rose 1.3% as the electric-vehicle maker reported better-than-expected second quarter revenue.

Advancing issues outnumbered decliners by a 2.35-to-1 ratio on the NYSE and by a 1.80-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and 29 new lows, while the Nasdaq recorded 28 new highs and 18 new lows.