By Stephen Culp
NEW YORK (Reuters) -U.S. stocks ended higher on Friday, extending their biggest weekly percentage gains of the year as worries of an economic downturn eased and investors focused on the Jackson Hole Economic Symposium next week.
The S&P 500 and the Nasdaq notched their seventh straight session of gains, as stocks recouped losses from a tailspin two weeks ago. The sell-off, sparked by weak economic data and heightened recession fears, confirmed the Nasdaq had entered correction territory.
All three indexes recorded their biggest weekly percentage gains since late October, with the S&P 500 and the Nasdaq posting their first weekly gain in five.
"What were seeing in today's markets is an extension of the comeback and the calming of earlier recession fears," said Greg Bassuk, CEO of AXS Investments in New York.
"The positive economic data is really what's fueling this rally, giving greater confidence to investors that are recession is likely to be avoided, and that the Fed will begin cutting rates in September."
A barrage of high profile economic data this week, including the Labor Department's consumer price index and a retail sales report from the Commerce Department, provided assurances that inflation continues meandering down toward the Federal Reserve's 2% target, and that consumer spending is healthy.
Data on Friday showed U.S. single-family housing starts dropped to a near 1-1/2-year low in July, while the University of Michigan's preliminary take on August consumer sentiment showed stronger-than-expected improvement.
Global central bank officials will speak at the symposium in Jackson Hole, Wyoming, next week, with Fed Chair Jerome Powell's keynote speech on Friday potentially setting expectations for a U.S. rate cut trajectory.
"All eyes are going to be laser-focused on Powell's comments next week," Bassuk said. "Market activity this year has consistently been based on the likelihood and extent of Fed rate cuts."
Chicago Fed chief Austan Goolsbee said in an interview with National Public Radio that central bank officials should be wary of maintaining restrictive policy longer than necessary.
Financial markets are betting on a 74.5% likelihood that the Fed will cut its key policy rate by 25 basis points as it ends its September policy meeting, with a diminishing 25.5% chance of a super-sized 50-basis-point cut, CME's FedWatch tool showed.
The Dow Jones Industrial Average rose 96.7 points, or 0.24%, to 40,659.76. The S&P 500 gained 11.03 points, or 0.20%, at 5,554.25 and the Nasdaq Composite added 37.22 points, or 0.21%, at 17,631.72.
Among the 11 major sectors of the S&P 500, financials enjoyed the biggest percentage gain, while industrials suffered the largest drop.
Applied Materials (NASDAQ:AMAT) slid 1.9%, reversing its surge after the chip-making equipment firm forecast stronger-than-expected fourth-quarter revenue.
Amcor (NYSE:AMCR) posted a bigger-than-anticipated decline in fourth-quarter sales. The packaging company's U.S.-listed shares dropped 3.7% in the wake of the report.
Advancing issues outnumbered decliners on the NYSE by a 2.22-to-1 ratio; on Nasdaq, a 1.53-to-1 ratio favored advancers.
The S&P 500 posted 13 new 52-week highs and no new lows; the Nasdaq Composite recorded 66 new highs and 85 new lows.
Volume on U.S. exchanges was 10.11 billion shares, compared with the 12.27 billion average for the full session over the last 20 trading days.