Stocks rally toward first weekly win streak since summer

Traders work on the floor at the New York Stock Exchange in New York, Aug. 10, 2022. Stocks slipped in morning trading on Wall Street Wednesday, Oct. 26, 2022 and big technology stocks were the heavy weights on major indexes following several weak earnings reports and financial forecasts. The S&P 500 fell 0.4, despite more stocks gaining ground than falling in the benchmark index. The tech-heavy Nasdaq slipped 1.5%. The Dow Jones Industrial Average gained ground. Alphabet and Microsoft each slumped after reporting disappointing results. (AP Photo/Seth Wenig, file)

Traders work on the floor at the New York Stock Exchange in New York, Aug. 10, 2022. Stocks mostly rose on Wall Street on Thursday, Oct. 27, 2022, but major indexes remained unsettled as more big companies report earnings. The benchmark index had more gainers than losers, but a slide from several big technology stocks with outsized valuations were more than offsetting gains elsewhere. (AP Photo/Seth Wenig, File)

FILE- A sign for New York Stock Exchange is displayed on the floor at the NYSE in New York, July 27, 2022. Most stocks are rising on Wall Street Friday, Oct. 28, led by Apple, Exxon Mobil and other companies that made even bigger profits during the summer than expected. T (AP Photo/Seth Wenig, File)

Wall Street is rallying Friday to cap another strong week for stocks, led by Apple and other companies that made even bigger profits during the summer than expected.

The S&P 500 was 2.4% higher in afternoon trading and heading for its first back-to-back weekly gains since August. The Dow Jones Industrial Average was up 796 points, or 2.5%, to 32,829, as of 3:21 p.m. Eastern time, and the Nasdaq composite was 2.7% higher.

Smaller company stocks also gained ground, lifting the Russell 2000 index by 2.1%.

One reason that stocks have revived recently is hopes for a “pivot” by the Federal Reserve, where the central bank dials down the big interest-rate hikes that have shaken the market. Such a move could boost the market, but many analysts say such hopes may be overdone.

“This rally has now gotten a bit irrational and fragile at this level,” said Liz Young, chief investment strategist at SoFi.

The central bank has been very clear about its plan to err on the side going too far in order to tame inflation, she said, which means the big gains on hopes of a pullback seem premature.

More recently, many big U.S. companies have been reporting stronger earnings than expected, though the bag remains decidedly mixed.

Apple rose 7.4% and was the strongest force lifting the S&P 500 in its first trading after reporting fatter revenue and profit than expected for the latest quarter. Intel jumped 10.2% after delivering much bigger profit than analysts forecasted even though it said it saw “worsening economic conditions.”

Gilead Sciences soared 12.5%, and T-Mobile US gained 7.6% after they also topped Wall Street's profit expectations.

They helped to offset a 7.2% drop for Amazon, which offered a weaker-than-expected forecast for upcoming revenue. It was the latest Big Tech company to take a beating this week after reporting some discouraging trends. It's a sharp turnaround after the group dominated Wall Street for years with seemingly unstoppable growth.

Earlier in the week, Meta Platforms lost nearly a quarter of its value after reporting a second straight quarter of revenue decline amid falling advertising sales and stiff competition from TikTok. Microsoft and Google's parent company also reported slowdowns in key areas.

Such woes have created a sharp split on Wall Street this week, between lagging Big Tech stocks and the rest of the market. The Nasdaq, which is stuffed with high-growth tech stocks, is on track for a gain of 2.1% this week. It would have an even worse showing if not for Apple's boost from Friday. The Dow, meanwhile, is roaring toward a 5.7% jump for the week because it has less of an emphasis on tech.

Rising interest rates have hit Big Tech stock prices harder than the rest of the market, and the pressure increased Friday as yields climbed.

“The markets still seem to not want to believe that we might end up in a place where an earnings recession is possible,” Young said.

Data released in the morning showed the raises that U.S. workers got in wages and other compensation during the summer was in line with economists’ expectations. That should keep the Fed on track to keep hiking rates sharply in hopes of weakening the job market enough to undercut the nation’s high inflation. Other data showed the Fed's preferred measure of inflation remains very high, and U.S. households continue to spend more in the face of it.

The Fed is trying to starve inflation of the purchases made by households and businesses needed to keep it high. It's doing that by intentionally slowing the economy and the jobs market. The worry is that it could go too far and cause a sharp downturn.

The Fed has already raised its benchmark overnight interest rate up to a range of 3% to 3.25% up from virtually zero in March. The widespread expectation is for it to push through another increase that's triple the usual size next week, before it potentially makes a smaller increase in December. Higher rates not only slow the economy, they also hurt prices for stocks and other investments.

The yield on the two-year Treasury, which tends to track expectations for Fed action, rose to 4.42% from 4.28% late Thursday.

The 10-year yield, which helps set rates for mortgages and many other loans, climbed to 4.01% from 3.93%.

Trading in Twitter's stock has ended, after Elon Musk has taken control of the company following a lengthy legal battle.

In Europe, stock indexes were mixed in relatively muted trading.

Shares fell 0.9% in Tokyo even as the government approved a massive stimulus spending package to help the world’s No. 3 economy cope with inflation. As expected, the Bank of Japan wrapped up a policy meeting by keeping its ultra-lax monetary policy unchanged even as it forecast higher inflation.

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Associated Press writers Elaine Kurtenbach, Matt Ott and Mari Yamaguchi contributed.