Stocks Soar, Dow, S&P And Nasdaq Up More Than 6% For The Week  Image: Bigstock Stocks closed sharply higher on Friday and for the week. It's been a while since the markets have had a positive weekly close. In fact, the Dow just came off its 8th weekly loss in a row (longest losing streak in 90 years), while the S&P and Nasdaq just recorded their 7th weekly loss in a row (longest losing streak in 21 years). So the markets were long overdue for an up week. And they finally delivered. For the week, the Dow was up 6.24%, the S&P by 6.58%, and the Nasdaq by 6.84%. And the Dow and the S&P are higher for the month with one more trading day to go. (The Nasdaq is still in the red for the month, but nothing another good up day couldn't fix.) The markets still have a lot of work to do. The Dow, from its all-time high close, is now down 'just' -9.75%, after being down as much as -16.75% at its worst. They exited correction territory, but are still in pullback territory. The S&P is down -13.31% from their all-time high close. At their worst, they were down by -20.56%, after slipping into bear market territory the previous week, intraday, before escaping by the close. Since they never closed below the -20% threshold, their decline was always only classified as a correction. And they remain in correction territory now, although much higher up in that range. The Nasdaq is down by -24.45% from their highest close vs. their worst levels of -31.27%. They entered bear market territory back in March. And they are still in bear market territory. But well off their lows. The catalyst for last week's rally was severalfold. Again, the market was grossly oversold following multi-decade records for weekly losing streaks. Valuations were pushed down to the lowest levels in more than 2 years. And last week's FOMC minutes showed the Fed's commitment to raising interest rates by 50 basis points at the upcoming June and July meetings, and to begin their balance sheet reduction on June 1st. Moreover, the Fed acknowledged the strength in the economy, they expressed confidence in a rebounding Q2, and that they anticipate GDP to 'advance at a solid pace over the remainder of the year.' That helped deflate the growing recession narrative. And it showed that the market had been pricing in a worst-case scenario, i.e., recession, which was starting to look more and more like it wasn't going to happen. And traders quickly started repricing stocks higher. As spectacular as last week's price action was, it feels like there's lots more upside to go. In the meantime, we've got plenty of economic reports out this week, including the always important Employment Situation report on Friday. Then, a week and a half later, we'll get the next FOMC Announcement on June 15th, when the Fed is expected to raise rates by 50 basis points. Granted, it's almost a fait accompli, given their messaging. But I suppose nothing is done until it's done. Nonetheless, the expectation of such a move has been interpreted bullishly. For now, last week's rally feels good. And it feels like there's some real substance behind the turnaround. And traders will be watching to see if they can build on last week's gains (and maybe start an upside winning streak). See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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