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    Friday, May 10, 2024

    Wall Street recovers after two-day plunge

    Traders decided that the stock market has suffered enough, at least for now.

    After a two-day plunge, stocks ended the week with an advance on Friday, suggesting that Wall Street may be successfully weaned from the Federal Reserve's easy money after all.

    "Saner heads are prevailing," said Jim Dunigan, chief investment officer at PNC Wealth Management. "People are looking a little deeper into the message from the Fed - the economy is getting better," he said. "At the end of the day that's a positive."

    Investors had known that sooner or later the Fed would quit spending $85 billion per month pumping money into the U.S. economy.

    That money has been a big driver behind the stock market's bull run the last four years. It led to low interest rates that encouraged borrowing for everything from factory machinery to commercial airplanes to home renovations. Has the economy been great? No. Unemployment is still high and U.S. growth has been anemic. But it could have been worse. Investors were confident enough in a growing economy that the Standard & Poor's 500 index hit an all-time high of 1,669 on May 21.

    Then on Wednesday, the Fed said it would aim to turn off that spigot by the middle of next year as long as the economy is strong enough.

    Just because investors knew it was coming didn't mean they liked it. The Dow dropped 560 points on Wednesday and Thursday.

    Investors recovered their mojo on Friday. The Dow Jones industrial average rose 41.08 points, or 0.3 percent, to close at 14,799.40. The Standard & Poor's 500 index rose 4.24 points, or 0.3 percent to close at 1,592.43.

    The gains were led by the kinds of stocks that investors favor when they want to play it safe. Makers of consumer staples, utilities, and health care companies rose the most of the 10 industries in the S&P 500 index. The only two categories that fell were technology stocks and companies that make basic materials.

    Friday's gain wasn't enough to erase the market's loss for the week. The S&P 500 fell 2.1 percent for the week, and the Dow was down 1.8 percent. Stocks have now fallen two weeks in a row, and in four of the past five.

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