US stocks climb with government shutdown likely averted; consumer sentiment slips

Investing.com-- U.S. stocks rose Friday, bouncing at the end of the week after the bellwether S&P 500 index slipping into correction territory on concerns over an escalating trade war and potential recession.

At 09:45 ET (13:45 GMT), the Dow Jones Industrial Average traded 270 points, or 0.7%, higher, the S&P 500 index rose 68 points, or 1.2%, and the NASDAQ Composite gained 295 points, or 1.7%.

The S&P 500 closed 1.4% lower on Thursday, entering correction territory, which is typically defined as a 10% fall from a recent peak.

The Dow is on track for its second straight losing week and worst weekly decline since June 2022. This would be the fourth negative week in a row for the S&P 500 and Nasdaq.

Government shutdown likely averted

Sentiment has been boosted after Senate Democratic Leader Chuck Schumer announced late Thursday that he would support the Republican-crafted stopgap funding bill to prevent a government shutdown, despite reservations within his party.

Schumer’s backing of the bill is seen as a strategic move to avoid a shutdown, which would commence at midnight on Friday when current funding expires for programs excluding Social Security, Medicare, and Medic aid.

The proposed bill was passed by the House of Representatives earlier this week.

Michigan sentiment data 

However, despite improved technicals that could support short-term rebounds, "rallies will likely be sold until Trump or the Fed pivot," Barclays analysts wrote in a note Friday. 

President Donald Trump further escalated trade tensions on Thursday by threatening to impose a 200% tariff on European alcoholic beverages, including wines and champagnes, in retaliation for the European Union’s decision to levy a 50% tariff on American whiskey. 

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

The EU’s move, effective April 1, responded to the U.S.’s recent 25% tariffs on imported steel and aluminum.

Investors fear the escalating trade war could reignite inflation and potentially lead the U.S. economy into a recession.

Additionally, the Federal Reserve has turned more hawkish, with these inflation fears stopping the recent run of interest rate cuts

Amid fears of an economic slowdown, U.S. consumer sentiment deteriorated by more than expected in March, while year-ahead expectations for inflation jumped to their highest level since November 2022, in a sign that households are becoming increasingly wary of the possible impact of Trump’s tariff plans.

The University of Michigan’s Surveys of Consumers on Friday said its Consumer Sentiment Index fell to 57.9 this month, down from 64.7 in February, a preliminary reading showed. Economists had seen the figure at 63.1.

While current economic conditions were little changed, expectations for the future slumped across several facets of the U.S. economy, including personal finances and stocks markets, the survey found.

"Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences," said Joanne Hsu, Director of the Surveys of Consumers at the University of Michigan.

One-year inflation expectations, meanwhile, increased to 4.9% from 4.3%, marking three consecutive months of what the survey described as "unusually large" upticks of 0.5 percentage points or more. Long-run expectations for price gains also surged to 3.9%, up from a previous level of 3.5% -- the largest month-on-month increase seen since 1993.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.Tesla attempts to defend Chinese market share

In the corporate sector, Tesla (NASDAQ:TSLA) stock rose 2.5% after Reuters reported the EV manufacturer is set to introduce a more affordable version of its Model Y in China, aiming to strengthen its position in its second-largest market.

Tesla stock has fallen over 30% this month alone amid outrage over Elon Musk’s role with DOGE, slowing sales, and protests at Tesla dealerships. Tthe electric vehicle maker has also warned that reciprocal tariffs as part of the Trump-instigated trade war could harm it.

Crude gains on Ukraine ceasefire doubts

Oil prices bounced on Friday after Russian President Vladimir Putin suggested that a U.S. proposal for a ceasefire in the war in Ukraine needed some reworking.

At 09:45 ET, Brent futures rose 0.3% to $70.11 a barrel, while U.S. West Texas Intermediate futures rose 0.4% to $66.79 a barrel.

Putin said on Thursday that while Russia supported the plan in principle, more clarifications and conditions on a range of points had to be sorted out before the fighting could come to a halt.

(Ayushman Ojha contributed to this article.)

 Which stock should you buy in your very next trade?

With valuations skyrocketing in 2024, many investors are uneasy putting more money into stocks. Unsure where to invest next? Get access to our proven portfolios and discover high-potential opportunities. In 2024 alone, ProPicks AI identified 2 stocks that surged over 150%, 4 additional stocks that leaped over 30%, and 3 more that climbed over 25%. That's an impressive track record. With portfolios tailored for Dow stocks, S&P stocks, Tech stocks, and Mid Cap stocks, you can explore various wealth-building strategies.

Unlock ProPicks AI