Stock Market Today: The Dow Gained, Coinbase Soared

Text size

The stock market popped Friday and snapped a three-week losing streak, as the dollar slipped from its recent high. The market isn’t yet out of the woods.

The

Dow Jones Industrial Average
advanced 377 points, or 1.2%, while the

S&P 500
gained 1.5%, and the

Nasdaq Composite
advanced 2.1%. For the week, the Dow, the S&P, and the Nasdaq gained 2.8%, 3.6% and 4.1%, respectively.

“Wall Street is finishing the week on a positive note as the dollar’s rally has run out of steam as optimism grows for inflation to continue to come down,” wrote Edward Moya, senior market analyst at Oanda. 

The

U.S. Dollar Index
fell 0.7% Friday, its third consecutive daily drop. It hit a multidecade high of just over 110 earlier this week. U.S. bond yields climbed the past few weeks, reflecting the Federal Reserve’s plan to aggressively raise interest rates to tame inflation–and with U.S. yields more attractive than those overseas, investors buy dollars. This week, though, a weakening dollar is consistent with a slight decline in yields. The 10-year Treasury yield dropped Friday to 3.32% after having hit above 3.35% earlier this week. 

A stronger dollar, however, pressures U.S. corporate earnings: Sales made overseas in foreign currencies translate into fewer dollars when the buck rises. For now, it’s the dollar, more than anything, which is driving stocks. “All anyone needs to do to figure out if we are in a risk-on or risk-off mood is to go quickly to the screens to see what the U.S. dollar is doing,” wrote Rosenberg Research’s David Rosenberg.

This all sets the stage for the stock market’s next big test: Inflation data. When August’s consumer price index hits the wires on Tuesday, the results could show a decline to 8.1%, from 8.5% in July. If that prediction proves accurate, it would be the second consecutive year-over-year decline in inflation. Another decline would increase the chances that the Fed can soon slow down the pace of rate hikes.

That’s unlikely to happen in September, when the Fed is expected to raise short-term rates by three-quarters of a percentage point. New York Fed President Bill Dudley just said that the central bank still needs to lift rates to a level that would significantly restrict economic activity.

But Tuesday’s inflation data could impact rate hike expectations beyond this month. The hope is that the Fed only needs to hike by half a percentage point after September’s increase.

“if the [CPI] number is higher this will be a negative for stocks and bonds,” wrote David Donabedian, chief investment officer of CIBC Private Wealth US. “If the report is less, it will be a catalyst for a market rally.”

Overseas, the pan-European

Stoxx 600
rose 1.5%, and Hong Kong’s

Hang Seng Index
ended up 2.7%. Asian stocks were buoyed following an unexpected drop in Chinese inflation data, which analysts said raises the prospect of further monetary policy easing in the world’s second-largest economy, easing that could offset some of the tightening happening elsewhere.

Here are some stocks on the move Friday:

A surge in cryptocurrency prices—with Bitcoin flying 10% higher, past the key $20,000 level and above $21,000—has boosted shares in companies exposed to digital assets. Crypto exchange

Coinbase Global

(ticker: COIN) was 11% higher, with Bitcoin miners

Marathon Digital

(MARA) and

Riot Blockchain

(RIOT) up 6.8% and 11%, respectively.

Coinbase

was also upgraded to Buy from Outperform at Daiwa.

Zscaler

(ZS) stock gained 22% after the cloud company said it expects fiscal first-quarter adjusted earnings of 26 cents a share, higher than the 21 cents a share expected by analysts. The group also guided for revenue in the range of $339 million to $341 million, compared with Wall Street’s consensus around $325 million.

DocuSign

(DOCU) advanced 11% following quarterly results from the e-signature company with earnings and revenue ahead of analysts’ estimates, in addition to a raised fiscal-year billings forecast.

DocuSign

earned an adjusted 44 cents a share in the last quarter, ahead of the 42 cents expected by Wall Street.

Digital World Acquisition Corp.

(DWAC)—the special-purpose acquisition company (SPAC) aiming to take former President Donald Trump’s media company public via merger— gained 2.8%. The SPAC announced a three-month extension to give it time to complete the deal with Trump Media and Technology Group.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com and Jack Denton at jack.denton@dowjones.com