Dow Jones and Nasdaq 100: Volatile Week Ends with a Rally – but Is the Selling Over?

Stocks staged a strong rebound Friday, with the Dow Jones Industrial Average surging 674 points (+1.65%), while the S&P 500 gained 2.13% and the Nasdaq jumped 2.61%. Despite the rally, major indexes logged their fourth straight weekly loss, with the Dow suffering its worst week since March 2023.

Investors stepped in to buy beaten-down stocks after Thursday’s selloff pushed the S&P 500 into correction territory, down more than 10% from recent highs. A pause in tariff-related headlines helped ease market concerns, while big tech stocks, including Nvidia (+5%), Tesla (+4%), and Meta (+3%), led the recovery. However, weak consumer sentiment data and ongoing uncertainty around economic policy continue to weigh on markets.

Bond markets have provided downside protection, outperforming stocks year-to-date. The 10-year Treasury yield held at 4.32% for the week, but declining yields suggest growing expectations for Federal Reserve rate cuts. With economic growth concerns rising, investors have increased allocations to bonds as a defensive move.

For portfolio positioning, extending duration within investment-grade bonds could be beneficial if 10-year yields push toward 4.5%, as lower interest rates would support bond prices.

International Stocks Outpace U.S. Equities

While U.S. stocks have struggled, international markets have outperformed. European and Chinese equities have gained 8%-10% year-to-date, as investors shift toward more attractively valued markets. The EuroStoxx index is up over 10%, benefiting from central bank rate cuts and fiscal stimulus measures.

Although U.S. equities have historically led global markets, this year’s divergence highlights the importance of international diversification, particularly during periods of economic uncertainty.