By Stephen Culp
NEW YORK (Reuters) - U.S. stocks closed sharply higher on Friday, ending several days of sell-offs with a rebound fueled by upbeat earnings, strong economic data and easing fears of a larger-than-expected interest rate hike by the Federal Reserve.
All three major U.S. stock indexes posted solid gains, with financials leading the charge in the wake of Citigroup Inc (NYSE:C)'s earnings beat. This reversed Thursday's sell-off driven by downbeat guidance from rivals JPMorgan Chase (NYSE:JPM) and Morgan Stanley (NYSE:MS).
The S&P 500 and the Dow both snapped five-day losing streaks, and all three indexes ended below last Friday's close.
"We're still below the downward sloping trend line," said Sam Stovall, chief investment strategist of CFRA Research in New York. "One day does not a new trend make."
Consumer prices in June showed the highest annual growth rate since 1981, raising chances that the Fed could raise its key fed funds target rate by 100 basis points, steeper than the 75 basis point hike previously expected.
"(Investors) would be unnerved by a 100 basis point rate hike, as it would imply that the Fed does not know what it is doing and is being controlled by the data," Stovall added.
Those fears were calmed by remarks from Fed officials on Thursday and Friday, which indicated an interest rate increase of 75 basis points is likely in the cards.
Economic data released on Friday surprised to the upside, with stronger-than-expected retail sales, an uptick in consumer sentiment, lower inflation expectations and cooling import prices.
"Economic indicators are not consistent right now," said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York. "They are positive and negative, which shows we're in a period of transition.
The Dow Jones Industrial Average rose 658.09 points, or 2.15%, to 31,288.26, the S&P 500 gained 72.78 points, or 1.92%, at 3,863.16 and the Nasdaq Composite added 201.24 points, or 1.79%, at 11,452.42.
All 11 major sectors of the S&P 500 ended the session higher, with financial stocks easily nabbing the largest percentage gain of 3.5%.
Second-quarter earnings season is well underway, with 35 of the companies in the S&P 500 having reported. Of those, 80% have beaten Street expectations, according to Refinitiv.
Analysts now expect aggregate year-on-year S&P 500 second-quarter profit growth of 5.6%, down from the 6.8% estimate at the beginning of the quarter.
Citigroup bucked the trend among big bank earnings reports as its quarterly profit beat expectations, sending the stock up 13.2%.
Wells Fargo (NYSE:WFC) & Co said its quarterly profit nearly halved due to increased loan loss provisions and a weak mortgage business. Still, its shares gained 6.2%.
The S&P Banking index jumped 5.8%, its biggest one-day percentage surge since January 2020.
Unitedhealth Group Inc advanced 5.4% after the healthcare company raised its annual profit forecast for the second straight quarter.
BlackRock Inc (NYSE:BLK) rose 2.0% even after the world's largest asset manager posted a steeper-than-expected profit drop.
Market participants are looking to next week's full ledger of scheduled earnings releases, from Goldman Sachs Group Inc (NYSE:GS), Bank of America Corp (NYSE:BAC), International Business Corp, Netflix Inc (NASDAQ:NFLX), Tesla (NASDAQ:TSLA) Inc, Twitter Inc (NYSE:TWTR) and assorted heavy-hitting industrials.
Advancing issues outnumbered decliners on the NYSE by a 4.53-to-1 ratio; on Nasdaq, a 2.36-to-1 ratio favored advancers.
The S&P 500 posted one new 52-week high and 31 new lows; the Nasdaq Composite recorded 37 new highs and 126 new lows.
Volume on U.S. exchanges was 10.26 billion shares, compared with the 12.31 billion average over the last 20 trading days.