Stocks advance but pace toward weekly losses

U.S. stocks gained at Friday’s open as investors neared the end of a turbulent trading week marked by mixed retail earnings and a chorus of hawkish Fedspeak.

The S&P 500 (^GSPC) rose 0.8%, while the Dow Jones Industrial Average (^ DJI) added 250 points, or 0.7%. The technology-intensive Nasdaq composite (^IXIC) increased by 0.9%. Treasury yields continued to climb, with the benchmark 10-year bond returning above 3.8% and the rate-sensitive 2-year yield approaching 4.5%.

A panel of Fed officials pushed back on Thursday on speculation that a pause in monetary tightening is near. The remarks made in separate speaking engagements across the country threw stocks and bonds into disarray after a fleeting uptrend propelled by softer inflation data.

Inflation has only recently showed signs of moderationwith the consumer and producer price data still stubbornly high despite the pullback in October. Meanwhile, the United States retail sales grew at the fastest clip in eight months over the same period, prompting policymakers to insist on tough messages about the work that still needs to be done to reduce high costs.

Minneapolis Federal Reserve Chairman Neel Kashkari said during a webcast of the Minnesota Chamber of Commerce event that the extent to which policymakers expect to raise their key federal funds rate remains an open question.” His comments came after St. Louis Fed Chairman James Bullard and San Francisco Fed President Mary Daly each said the central bank is considering a terminal rate of up to 5.25%.

President and CEO of the Federal Reserve Bank of St. Louis James Bullard. (ISAAC LAWRENCE/AFP via Getty Images)

“Fed Chair Powell recalibrated monetary policy at the November FOMC meeting by adopting a new ‘speed versus destination’ paradigm – indicating an intention to achieve a higher terminal federal funds rate while doing so at a slower pace,” Gregory Daco, chief economist at EY Parthenon said in a note. “The challenge for the Fed will be to prevent excessive and counterproductive easing of financial conditions in the face of weaker-than-expected inflation.”

Goldman Sachs Group on Thursday as well raised its forecast for the Federal Reserve’s terminal rate in a range of 5% to 5.25%, beginning another rise of 25 basis points in May after increases of this magnitude in February and March, and half a percentage point in December.

“Inflation is likely to remain uncomfortably high for some time, and this could put pressure on the FOMC to make a longer series of small hikes next year,” the economists led by Jan Hatzius also said.

In the shadow of renewed nervousness in interest rates, Gap (GPS), Ross Stores (ROST), and Williams-Sonoma (WSM) closed a busy week of retail revenue.

Gap shares jumped 9% on Friday morning after the company revealed superior results Wall Street estimates. Chief Financial Officer Katrina O’Connell, however, stressed that the macroeconomic environment remains challenging, but that Gap will take a “cautious approach given consumer uncertainty”.

Shares of Ross Stores rebounded 16% after the the retail chain beat its profit forecast and raised its fourth-quarter guidance, citing sales momentum and improved holiday assortments.

Meanwhile, shares of furniture store Williams Sonoma fell nearly 9% after drew its guidelines until 2024 on “macro uncertainty”.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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