Stocks Rise; Investors Await Jobs Data and the Fed
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What drove U.S. stocks to post solid gains on Friday?
With your money briefing, I'm Charlie Turner in New York for The Wall Street Journal. U.S. stocks posted solid gains on Friday, aided by some strong corporate earnings and news of a deal to end the government shutdown. The Dow Jones Industrials rose 183 points Friday to 24,737. The Nasdaq Composite rose 91 points and the S&P 500 gained 22. Both the Dow and Nasdaq were up around one-tenth percent on the week. The S&P fell two-tenths percent. We're joined by Mike Worsthorn, who covers the markets for The Wall Street Journal. Mike, some positive earnings news helped, but investors also welcome the fact that President Trump agreed to a deal to reopen the government for three weeks.
We're seeing over the course of this week, but really just the start of this year, just a chipping away at the problems that have been plaguing the market, especially in the fourth quarter of last year. So a couple of good earnings that came out this week. So far, earnings are shaping up to be fairly good overall around 11% year-over-year earnings growth for the S&P 500. It's not as high as, say, expectations were in September. So there was some adjusting to that, obviously, in the fourth quarter that led to that sell-off. But people are realizing that earnings haven't fallen off a cliff. So they're seeing companies like Like IBM, Comcast, United Technologies all this week report pretty strong earnings.
On top of all that, the government shutdown was just something that's been lurking in the background of all this. I mean, obviously, investors weren't too concerned about the immediate impact because we've had this incredible rally over the last five weeks. The Dow's been up for five straight weeks now. But, you know, that said, there was always this concern that if the government shutdown were to go on longer and longer, that at some point you're going to see that impact on GDP growth. So with this, that just knocks off another one of those concerns. It's still more, but this just gets that list down to a more manageable size for investors.
And we should say negotiations may fall apart over the next few weeks. We could be back to square one. But I guess it's a load off investors' minds for the time being. Yes. There was also news from the Wall Street Journal that Federal Reserve officials were weighing an earlier end to its balance sheet reduction process.
When we think about sort of all these issues focusing on the markets, I mean, the Fed is probably the biggest factor of all this. You know, I think investors over the next several weeks... are going to be looking very closely to see sort of what the Fed's willing to do with its balance sheet, whether or not it wants to end that process earlier or push it out a little further. And even just as importantly, interest rates as well. So these things are, as investors are getting a sign that maybe some of the tightening that the Fed was considering is not going to be as quickly as they originally anticipated. I mean, those are things that I think investors are seeing and they're getting some certainty that at least for now, this isn't going to make stocks go off a cliff.
We had a sharp dip in the markets midweek after news that China's economy grew at the slowest pace in nearly three decades last year. So it's not really the worries about trade with China. It's just the worry about China's economy.
And that ties into just sort of the growth all around the world. I mean, it's why you sort of see this back and forth. So Tuesday was a pretty rough day for the markets. They're digesting that IAF news, as you mentioned. But then they were trying to balance that with the fact that corporate earnings here in the U.S. are pretty good. There was at one point this huge fear that we're going to hit a recession. We're seeing the U.S. economy is, in fact, weakening. Obviously, so is China. So is Europe. But the question is, how fast is that going to weaken that we're in this recession? I think there's a realization that Over in China, they have their problems, but they're a little more contained that you've got to worry about things here in the U.S., but it's not going to make things just immediately turn on a dime for the U.S.
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