Dow Jones rises 650 points as stock market rebounds

Analysts described the gains as a classic rebound, fueled by continued optimism about the state of the economy. All three indexes suffered on Wednesday after several leading technology companies reported disappointing earnings. But LPL Financial chief economist Jeffrey Roach said investors now appear to be taking more risks as the likelihood of a “soft landing” increases.

“We have an economy with low unemployment, rising wages, slowing inflation and the Federal Reserve about to cut interest rates,” Roach said.

The rebound comes on the heels of positive inflation data, which could increase the chances of the Federal Reserve cutting interest rates in September. Data released Friday suggests the Fed will cut interest rates in September. Preferred inflation measure WASHINGTON—Last week, official data showed that U.S. inflation slowed to 2.5% in the 12 months through June, providing further evidence that the central bank’s interest-rate hike campaign is working. On Thursday, a stronger-than-expected gross domestic product reading showed that the U.S. economy grew at a robust 2.8% annual rate in the second quarter, capping two years of robust expansion.

Friday's positive earnings were led by manufacturer 3M, which rose 21 percent after its financial results beat analysts' expectations.

Elsewhere, shares of Charter Communications rose about 15 percent after it reported sales that beat Wall Street estimates.

Analysts say stronger fundamentals have extended the market’s bull run into 2024. Earlier in the year, stock market gains were dominated by a handful of big tech companies, known as the “Magnificent 7,” which benefited from the hype surrounding artificial intelligence technology.

The gains now appear to be spread across industries, said Michael Farr of Washington-based investment firm Farr, Miller & Washington. The Russell 3000, which measures economically vulnerable small-cap stocks, is up 14% year-to-date, outperforming the Dow.

“There’s a shift from those six or seven great stocks to some blue-chip stocks, as things other than AI get exposure,” Farr said.