U.S. stocks pare gains, S&P 500 trades about flat after bear-market exit

What’s driving markets

U.S. stocks were trading higher on Friday afternoon, with the S&P 500 paring earlier gains but remaining on track to finish the week modestly higher.

The S&P 500 exited bear market territory on Thursday by closing 20% above last year’s trough in October. Although Wall Street cheered the milestone after a long, painful bear market, some are cautious about the technical exit.

“We advise investors against assuming that the recent upswing in equities can gain momentum,” said Solita Marcelli, chief investment officer for the Americas, at UBS Global Wealth Management, in a note Friday. “Until markets reach a new all-time high, it’s impossible to know whether the bear market trough—the ultimate low of the market cycle—is behind us.”

James Demmert, CIO at Main Street Research, was also cautious.

“Even though the S&P 500 is up just over 20% from the October 2022 low, that does not mean the bear market is over yet,” Demmert said in emailed commentary Friday. “The bear markets of 2000 and 2008 both saw rallies in excess of 20%, which did not constitute the end of the bear market, as the market experienced further downside after those rallies.”

Read: ‘Too soon to price in a recovery’: Here’s Citi Global Wealth’s investing strategy for a bear market that it says is not over yet

Friday was relatively quiet, with little economic data, as investors look ahead to next week when May inflation data and policy decisions from the Federal Reserve and European Central Bank are due.

Fed-funds futures on Friday were pointing to a 72.4% probability that the central bank will announce at the conclusion of its two-day policy meeting on June 14 that it’s pausing its interest-rate increases, according to the CME FedWatch Tool, at last check. Traders saw a 27.6% chance of a quarter-point rate hike by the Fed.

The Fed has been raising rates to combat high inflation.

See: Fed might hike interest rates again in June instead of a ‘skip,’ some economists think

Also read: Odds of U.S. ‘hard landing’ rising after Fed’s refusal to pause rate hikes earlier this year, warns Cam Harvey

Most of the S&P 500’s 11 sectors were trading lower Friday afternoon, with losses led by shares of materials companies. The strongest performing sectors were consumer discretionary and information technology, each with modest gains.

The Cboe Volatility Index
VIX,
+0.66%,
known as the Vix, was trading around 14 on Friday afternoon, below its long-run average of about 20. Some have interpreted the relatively low Vix as a sign that investors might be getting too complacent.

Companies in focus

• Tesla Inc.
  TSLA,
  +5.09%
  and General Motors Co.
  GM,
  +1.30%
  shares rose after the automakers said owners of GM’s electric vehicles will have access to Tesla’s fast-charging network in North America starting next year. Tesla shares are on track to log an 11th-straight gain as the maker of electric cars saw its shares as one of the best performers on the S&P 500.

• DocuSign Inc. shares
  DOCU,
  -2.73%
  dropped, after executives warned of smaller deal sizes and expansion rates as the e-signature company’s quarter and outlook surpassed Wall Street expectations.

• Planet Labs PBC
  PL,
  -27.13%
  plunged after the Earth-imaging company reported a narrower quarterly loss, but called for lower-than-expected revenue for its fiscal 2024.

• Salesforce Inc.
  CRM,
  +2.58%
  shares advanced, with sharp gains that placed the software-as-a-service pioneer among the best performers on the S&P 500 on Friday afternoon.

Jamie Chisholm contributed to this article.