A new batch of bank earnings and economic data Friday morning increased investors’ optimism about the state of the economy and relieved them of worries that the Federal Reserve could raise rates by a full percentage point at its meeting later this month.
Consumer spending makes up about two-thirds of the US economy. Given Friday’s good reports, the US economy may have grown in the second quarter, avoiding two straight quarters of a shrinking economy — a scenario some economists call a technical recession — noted Jeffrey Roach, chief economist at LPL Financial.
The new numbers and bank earnings helped soothe fears of a full percentage point hike by the Fed. Only 31% of investors are pricing in a 100 basis point hike as of Friday, compared with over 80% earlier in the week, according to the CME Fedwatch Tool.