Wall Street rebounds on strong US business activity and corporate earnings, but S&P 500 and Nasdaq still end volatile week in red

2:24

Wall Street finished higher on Friday as encouraging economic data and strong corporate earnings helped US shares recover from a volatile week dominated by concerns over rising government bond yields and Middle East tensions. The Dow Jones Industrial Average climbed 517.80 points, or 0.98%, to 53,277.01, while the S&P 500 gained 0.43% to 7,674.37. The technology-heavy Nasdaq Composite advanced 0.44% to 26,180.46.

Despite Friday's recovery, the major indices remained lower for the week. The S&P 500 declined 1.43%, the Nasdaq lost 2.05%, and the Dow fell 0.85%. The S&P 500 and Nasdaq consequently ended three-week winning streaks.

Investors have been closely watching US Treasury yields because higher yields increase borrowing costs and can make shares less attractive compared with government bonds.

Chris Zaccarelli, chief investment officer at Northlight Asset Management said, "In the middle of the week, equity investors were concerned yields could be on a one-way trip higher". Following the measures announced by the US Treasury to increase government bond repurchases, he added, "Investors aren't as worried any more."

Economic data also provided support. US business activity accelerated in August, driven by the strongest expansion in the services sector in nearly two years, helping offset weaker manufacturing growth. Meanwhile, UBS Global Wealth Management raised its year-end S&P 500 target to 8,100, citing stronger corporate earnings prospects.

Individual companies also strengthened sentiment. Ross Stores rose 4.4% after increasing its annual profit forecast, while Robinhood jumped 13.7% and Coinbase gained 8.2%. Attention now turns to Nvidia's quarterly results on 26th August and Federal Reserve Chair Kevin Warsh's appearance at Jackson Hole, both of which could provide the next major test for US equities.