Stocks end tumultuous week with a rally

A new batch of bank earnings and economic data Friday morning increased investors' optimism about the state of the economy and lessened worries that the Federal Reserve could raise rates by a full percentage point at its meeting later this month.

The Dow unofficially closed the day up 658 points, or 2.2%. The S&P 500 added 1.9% and the Nasdaq rose by 1.8%.

New earnings reports from Wells Fargo and Citigroup before the bell were well-received by markets, especially after JPMorgan and Morgan Stanley missed estimates on Thursday.

All the major averages closed the week in the red. The Dow dropped by 0.2%. The S&P and Nasdaq fell 0.9% and 1.6%, respectively.

Citigroup beat estimates and reported that it benefited from rising interest rates. Shares jumped by nearly 15%. Wells Fargo reported quarterly profit declines of 48% but its stock still gained 6%.

A red-hot inflation reading earlier this week sent markets reeling: The consumer price index, reported Wednesday, rose 9.1% year-over-year, the highest rate since 1981. But strong retail sales for June and preliminary consumer sentiment data released Friday helped buoy markets and ease tensions.

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.

Tech stocks, which are particularly vulnerable to interest rate hikes, also jumped on Friday. Meta Platforms and Amazon were up over 3.5% and Netflix gained over 7%.

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