Dow climbs nearly 400 points as stocks on track to snap 3 weeks of losses

What’s driving the markets?

Behind part of the renewed vigor for stocks has been a moderation in inflation expectations. Bond yields have cooled, with the 10-year Treasury note yield
TMUBMUSD10Y,
3.091%
receding this week at its fastest rate since March, although yields were modestly higher again on Friday.

Market strategists are starting to question whether slowing growth and rising unemployment might already be having an impact on inflation after Federal Reserve Chairman Jerome Powell acknowledged that a recession in the U.S. remained a possibility, although he said the Fed isn’t deliberately trying to provoke one.

On Friday, markets continued to factor in the possibility of “a recession stopping rate hikes in their tracks much sooner,” said Jeffrey Halley, senior market analyst at OANDA, in a note to clients.

Meanwhile, Powell said on Thursday that he doesn’t think a recession is inevitable, but that he does have an “unconditional” commitment to fight inflation. He has also said the Fed hopes to rein in higher prices without sparking an economic downturn.

Market strategists also attributed the bounce in stocks this week to technical factors, as some debated whether this week’s action marked the start of a bear-market rally — or simply fizzle into another “dead cat bounce.”

“The moves this week could still turn out to be the result of a financial market genetically preprogrammed to buy dips in equity and bond prices, thanks to two decades of central bank largess. It could also be a bear market correction as the stampede for the exit door got overdone in the short term, leading to a short-squeeze,” said Halley.

Read: Don’t trust the stock-market bounce until S&P 500 is back above 3,800: analysts

The economic spotlight for Friday will be on final reading of the University of Michigan’s consumer sentiment index, which will include an updated reading on consumers’ inflation expectations.

Read: Here’s the comment from Powell that could make it hard for the Fed to slow down the pace of interest-rate hikes

That data is due at 10 a.m., along with new home sales for May. Investors will also hear from a pair of Fed speakers, starting with St. Louis Fed President James Bullard, who said the Fed must act aggressively to curb inflation before expectations become unanchored.

San Francisco Fed President Mary Daly, who will speak at 4 p.m. Eastern.

Single-stock movers

• FedEx
  FDX,
  +8.19%
  shares rallied after the company shared strong profit and sales guidance for the rest of the year, while reporting higher-than-expected quarterly profits. Shares rose 7%.

• Zendesk
  ZEN,
  +27.70%
  shares were up 28% on reports the company is headed for a $10 billion acquisition.

• Cruise line and resort stocks outperformed on Friday, including Norwegian Cruise Line Holding
  NCLH,
  +9.86%
  s , Carnival Corp.
  CCL,
  +10.26%,
  Royal Caribbean
  RCL,
  +9.84%,
  Wynn Resorts
  WYNN,
  +8.59%
  and MGM Resorts
  MGM,
  +6.81%.
  The move appeared to be driven by Carnival’s latest earnings report.

Other markets

• The 10-year Treasury yield
  TY00,
  -0.09%
  climbed to 3.12% on Friday, although it remains sharply lower after peaking near 3.50% earlier this month.

• The ICE U.S. Dollar Index
  DXY,
  -0.21%,
  a measure of the greenback’s strength against a basket of rivals, was off 0.1%.

• Gold futures
  GC00,
  -0.11%
  expiring in August were down 0.3%.

• The European STOXX 600
  FXXP00,
  +1.95%
  climbed 1.7%, while the U.K.’s FTSE 100
  UKX,
  +1.71%
  index tumbled 1%.

• The Shanghai Composite was up 0.9%, while Hong Kong’s Hang Seng Index gained 2%; Japan’s Nikkei 225 index rose 1.2%.