By Noel Randewich and Sruthi Shankar
(Reuters) - The S&P 500 and Nasdaq ended sharply higher on Friday, extending a rally started the day before after a soft inflation reading raised hopes the Federal Reserve would get less aggressive with U.S. interest rate hikes.
Amazon (NASDAQ:AMZN) jumped 4.3%, with Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) both up more than 1% and contributing to the Nasdaq's gain.
On Thursday, the S&P 500 and the Nasdaq racked up their biggest daily percentage gains in more than 2-1/2 years as annual inflation slipped below 8% for the first time in eight months.
Declines in healthcare stocks limited the Dow Jones Industrial Average's gain, with UnitedHealth Group (NYSE:UNH) down 4.1% for the day.
"What we're really seeing today is simply a follow-through on yesterday. There's a lot of cash sitting on the sidelines that is being put to work," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
"Perhaps it signals some type of bottom being put in the market, some type of line drawn in the sand. But even if we put in a bottom, we're a long way away from setting new highs,” Ghriskey said.
Investors see an 81% chance of a 50-basis point rate hike in December and a 19% chance of a 75-basis point hike, according to CME Fedwatch tool.
Adding some nervousness on Wall Street, crypto exchange FTX said it would start U.S. bankruptcy proceedings and that CEO Sam Bankman-Fried resigned due to a liquidity crisis that prompted intervention from regulators around the world.
The S&P 500 climbed 0.93% to end the session at 3,993.05 points.
The Nasdaq gained 1.88% to 11,323.33 points, while Dow Jones Industrial Average rose 0.10% to 33,749.18 points.
Volume on U.S. exchanges was relatively heavy, with 13.5 billion shares traded, compared to an average of 12.0 billion shares over the previous 20 sessions.
Of the 11 S&P 500 sector indexes, six rose, led by energy, up 3.07%, followed by a 2.48% gain in communication services.
The S&P 500 growth index, which includes interest rate-sensitive technology stocks, rose 1.6%, beating the value index's gain of 0.3%.
For the week, the S&P 500 rose 5.9%, the Dow added 4.15% and the Nasdaq jumped 8.1%. It was the S&P 500's biggest weekly gain since June and the Nasdaq's largest weekly gain since March.
Worries about an economic downturn have hammered Wall Street this year. The S&P 500 remains down about 16% year to date, on course for its biggest annual decline since 2008.
U.S.-listed shares of Chinese companies rose, with Alibaba (NYSE:BABA) Group Holding Ltd gaining 1.4% after China eased some of its strict COVID-19 rules.
Advancing issues outnumbered falling ones within the S&P 500 by a 1.7-to-one ratio.
The S&P 500 posted 22 new highs and no new lows; the Nasdaq recorded 102 new highs and 110 new lows.