US stocks rallied on Friday to close out their dreary February on a brighter note.

The S&P 500 jumped 1.6 per cent to trim its loss for the month, enough to make it the worst only since December instead of since April. It had dropped in five of the prior six days after weaker-than-expected reports on the economy and worries about President Donald Trump’s tariffs knocked the index off its all-time high set last week.

The Dow Jones rose 601 points, or 1.4 per cent, and the Nasdaq composite climbed 1.6 per cent. The Australian sharemarket is set to rise, with futures on Saturday pointing to a gain of 48 points, or 0.6 per cent, at the open.

Much of the recent damage had focused on the market’s biggest winners of recent years, whose momentum had seemed nearly impossible to stop at times. Stocks that flew in the frenzy around artificial-intelligence technology slumped sharply, for example. Bitcoin, meanwhile, dropped more than 20 per cent from its record.

Many of those beaten-down areas of the market jumped on Friday to recover some of their losses. Nvidia, which has become one of the market’s most influential stocks, rose 4 per cent following its 8.5 per cent tumble and was the strongest force lifting the S&P 500. Bitcoin bounced back above $US84,000 ($135,330) after falling below $US79,000 during the morning.

Stocks rose following an economic report released in the morning that included both some encouraging and discouraging trends

Inflation across the country decelerated a bit and behaved pretty much exactly as economists expected, according to the measure that the Federal Reserve prefers to use. That’s good news for the entire market because it could give the Federal Reserve leeway to continue cutting its main interest rate at some point later this year.

That, in turn, could help goose the economy. The Fed has been keeping rates on hold so far this year after cutting them sharply late last year, in large part because of concerns about potentially stubborn inflation.

But Friday’s report also said that US households pulled back on their spending during January. That’s dangerous because their strong spending has been a major reason the US economy has avoided a recession despite high interest rates.

US consumers had already given big hints they’re under pressure and worried. Inflation is still high, even if it’s not as bad as its peak from 2022, and a widespread worry is that tariffs announced by Trump could push prices for the cost of living even higher. The uncertainty surrounding what is next was highlighted by Trump’s stunning Oval Office clash with Ukrainian President Volodymyr Zelensky on Friday in Washington.

Wall Street hopes that all the talk about tariffs are merely a tool Trump is using to negotiate with other countries and that he’ll ultimately pull back on them, which would mean less pain for the global economy than initially feared.

But recent reports have nevertheless shown all the talk has already pushed US consumers to brace for much higher inflation in the future. At some point, such worries could drive their behaviour, which could drag on the economy even without tariffs.

All the uncertainty around not only tariffs but also deregulation and other potential moves could mean “if the market doesn’t see Trump moving towards more market-friendly policies, the level of trust could continue eroding,” Bank of America economists wrote in a BofA Global Research report.

Of course, much of January’s drop in spending by US households could have been the simple result of painfully cold weather around the country and other anomalies. But it also followed several signals of slowing growth for the US economy, which closed 2024 running at a solid pace.

Most stocks within the S&P 500 rose on Friday, led by AES after the energy company reported profit for the latest quarter that blew past analysts’ expectations. CEO Andrés Gluski also said it’s seeing strong demand from AI data centres and new US manufacturing plants, and AES stock jumped 11.7 per cent.

Signet Jewelers rose 5.2 per cent after an investment firm, Select Equity Group, amassed a nearly 10 per cent ownership stake in the retailer and said it’s pushing the board to sell the company or find another way to boost its stock price.

They helped offset a 4.7 per cent drop for Dell, which reported stronger profit for the latest quarter than analysts expected but fell short on its revenue.

All told, the S&P 500 rose 92.93 points to 5,954.50. The Dow Jones Industrial Average gained 601.41 to 43,840.91, and the Nasdaq composite jumped 302.86 to 18,847.28.

In the bond market, Treasury yields sank again following the data on consumer spending and inflation. The yield on the 10-year Treasury fell to 4.20 per cent from 4.26 per cent late Thursday. It’s down sharply from last month, when it was approaching 4.80 per cent, as worries have grown about where the US economy is heading.

In stock markets abroad, indexes fell sharply in Asia as worries about tariffs continued.

China’s Commerce Ministry issued a statement Friday protesting Trump’s decision to double tariffs on Chinese products to 20 per cent, saying it violated international trade rules and would add to the “burden on American companies and consumers and undermine the stability of the global industrial chain.”

Indexes tumbled 3.3 per cent in Hong Kong, 2 per cent in Shanghai, 3.4 per cent in Seoul and 2.9 per cent in Tokyo.

AP

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