(Updates to 10:58 a.m. EDT)
Wall Street rebounded and Treasury yields paused in the wake of upbeat economic data on Friday as investors positioned themselves ahead of the long U.S. Memorial Day weekend and the unofficial start to summer.
The U.S. stock market's bounce-back caps a week in which minutes from the most recent Federal Reserve policy meeting struck a more hawkish-than-expected tone, economic data hinted at the possibility of rising inflation and megacap chipmaker Nvidia's NVDA.O beat-and-raise earnings report re-ignited investors' AI fervor.
The tech-heavy Nasdaq led all three major U.S. stock indexes higher in a broad-based rally; 10 of the 11 major sectors in the S&P 500 were green.
"We're seeing a bit of a relief rally from yesterday's sharp decline," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "It's Friday ahead of a long weekend and most of the market action will be in the early part of the session."
On a weekly basis, the S&P 500 and the Dow were on track to snap their streak of consecutive Friday-to-Friday gains, while the tech-laden Nasdaq appeared set to notch a nominal gain for the week.
Investors are growing increasingly resigned to the higher-for-longer interest rate narrative in the wake of the Fed minutes release on Wednesday, as well as cautious remarks from various policy makers which expressed doubt as to whether inflation is indeed on a reliable downward trajectory.
Financial markets are now pricing just one rate cut this year, a far cry from the six cuts that were projected earlier in the year.
On the economic front, new orders for U.S. durable goods increased more than expected, while the University of Michigan's final take on May consumer sentiment bumped higher, while near- and long-term inflation expectations cooled down.
"The economy is still growing and earnings have been good," Cardillo added. "Those are the basic fundamentals of the stock market."
The Dow Jones Industrial Average .DJI rose 49.56 points, or 0.13%, to 39,114.82, the S&P 500 .SPX gained 30.41 points, or 0.58%, to 5,298.25 and the Nasdaq Composite .IXIC added 143.36 points, or 0.86%, to 16,879.40.
European shares extended their sell-off as investor sentiment was dampened by interest rate worries, setting course for a weekly decline.
The pan-European STOXX 600 index .STOXX lost 0.24% and MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.26%.
Emerging market stocks lost 0.66%. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.86% lower, while Japan's Nikkei .N225 lost 1.17%.
Treasury yields pared earlier gains in the stronger-than-expected economic data.
Benchmark 10-year notes US10YT=RR last fell 1/32 in price to yield 4.4787%, from 4.475% late on Thursday.
The 30-year bond US30YT=RR last fell 3/32 in price to yield 4.5844%, from 4.58% late on Thursday.
The dollar dipped against a basket of world currencies but remained on track for a weekly gain as stronger-than-expected economic data has left markets on edge about the outlook for interest rate cuts.
The dollar index .DXY fell 0.35%, with the euro EUR= up 0.28% to $1.0843.
The Japanese yen weakened 0.03% versus the greenback at 156.99 per dollar, while Sterling GBP= was last trading at $1.2735, up 0.30% on the day.
Crude prices edged higher, after having been under pressure for much of the week as the notion of prolonged restrictive Fed policy dampened the demand outlook.
U.S. crude CLcv1 rose 0.79% to $77.48 per barrel and Brent LCOcv1 was last at $81.72, up 0.44% on the day.
Gold prices rose but appeared set for their first weekly fall in three due to lowered rate cut expectations.
Spot gold XAU= added 0.3% to $2,336.32 an ounce.
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