S&P 500 Recovers Despite Recession Fears and Yen-Related Sell-Off

The S&P 500 rose on Friday, reversing earlier declines driven by recession worries and a yen-funded carry trade unwind. Technology stocks led gains, while volatility decreased. Fed officials hinted at potential rate cuts, influencing market sentiment. Key economic data and individual stock performances played pivotal roles in market movements.

The S&P 500 ended higher on Friday, rebounding from Monday's steep decline fuelled by recession fears and a global yen-funded carry trade unwind.

The technology sector spearheaded the day's gains in the index. Meanwhile, the Cboe Volatility Index, Wall Street's "fear gauge," decreased after surging earlier in the week. On Thursday, Federal Reserve policymakers signaled confidence that cooling inflation would allow for future interest rate cuts, contingent on upcoming economic data.

Monday's significant dip was preceded by a sharp sell-off the previous week, triggered by a weaker-than-expected July jobs report that ignited recession concerns, alongside the Bank of Japan's interest rate hike, leading to a sharp yen appreciation. This prompted the unwinding of currency carry trade positions, impacting market sentiment. Michael James of Wedbush Securities remarked that recent sentiment has been dominated by less pessimism, although uncertainty remains ahead of the next Fed meeting in September. Investors are forecasting a 55% likelihood of a 50 basis point rate cut, according to the CME Group's FedWatch Tool.

Preliminary data indicated the S&P 500 rose by 25.11 points, the Nasdaq Composite gained 85.65 points, and the Dow Jones Industrial Average increased by 49.86 points. Upcoming U.S. consumer prices and retail sales reports could be pivotal for the American economy's outlook.

Notably, videogame publisher Take-Two Interactive and online travel agency Expedia saw stock price increases due to positive industry projections and earnings beats, respectively.

(Additional reporting by Shubham Batra and Shashwat Chauhan in Bengaluru; Editing by Shinjini Ganguli)

(With inputs from agencies.)