The S&P 500 rallied Friday, a day after correction as tech stocks racked up gains even ongoing trade war worries led to sharp decline in consumer sentiment.

At 12:58 ET (16:58 GMT), the Dow Jones Industrial Average traded 589 points, or 1.4%, higher, the S&P 500 index rose 1.9%, and the NASDAQ Composite gained 2.4%.

The S&P 500 closed 1.4% lower on Thursday, entering correction territory, which is typically defined as a 10% fall from a recent peak.

The Dow is on track for its second straight losing week and worst weekly decline since June 2022. This would be the fourth negative week in a row for the S&P 500 and Nasdaq.

Nvidia set to snap three-week losing streak

NVIDIA Corporation (NASDAQ:NVDA) jumped more than 4%, leading the broader market higher as the chipmaker looks to set to snap a three week losing streak.

On the earnings front, meanwhile, Ulta Beauty Inc (NASDAQ:ULTA) rose more than 12% after reporting its better-than-expected fourth-quarter results offset softer full-year guidance.

Semtech Corporation (NASDAQ:SMTC), meanwhile, reported a strong Q1 outlook following Q4 results that top estimates, sending its shares more than 18% higher.

Consumer sentiment falls to lowest in over two years

The University of Michigan’s Surveys of Consumers on Friday said its Consumer Sentiment Index fell to 57.9 this month, down from 64.7 in February, a preliminary reading showed. Economists had seen the figure at 63.1. 

That was the lowest level since November 2022 as uncertainty about tariffs and the economy weighed on sentiment.

While current economic conditions were little changed, expectations for the future slumped across several facets of the U.S. economy, including personal finances and stocks markets, the survey found.

“Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences,” said Joanne Hsu, Director of the Surveys of Consumers at the University of Michigan.

One-year inflation expectations, meanwhile, increased to 4.9% from 4.3%, marking three consecutive months of what the survey described as “unusually large” upticks of 0.5 percentage points or more. Long-run expectations for price gains also surged to 3.9%, up from a previous level of 3.5% — the largest month-on-month increase seen since 1993.

Government shutdown likely averted

Sentiment has been boosted after Senate Democratic Leader Chuck Schumer announced late Thursday that he would support the Republican-crafted stopgap funding bill to prevent a government shutdown, despite reservations within his party.

Schumer’s backing of the bill is seen as a strategic move to avoid a shutdown, which would commence at midnight on Friday when current funding expires for programs excluding Social Security, Medicare, and Medic aid.

The proposed bill was passed by the House of Representatives earlier this week.

Tariffs uncertainty persists

President Donald Trump further escalated trade tensions on Thursday by threatening to impose a 200% tariff on European alcoholic beverages, including wines and champagnes, in retaliation for the European Union’s decision to levy a 50% tariff on American whiskey. 

The EU’s move, effective April 1, responded to the U.S.’s recent 25% tariffs on imported steel and aluminum.

Investors fear the escalating trade war could reignite inflation and potentially lead the U.S. economy into a recession.

Additionally, the Federal Reserve has turned more hawkish, with these inflation fears stopping the recent run of interest rate cuts

Amid fears of an economic slowdown, U.S. consumer sentiment deteriorated by more than expected in March, while year-ahead expectations for inflation jumped to their highest level since November 2022, in a sign that households are becoming increasingly wary of the possible impact of Trump’s tariff plans.

Tesla attempts to defend Chinese market share

In the corporate sector, Tesla (NASDAQ:TSLA) stock rose 3.4% after Reuters reported the EV manufacturer is set to introduce a more affordable version of its Model Y in China, aiming to strengthen its position in its second-largest market.

Tesla stock has fallen over 30% this month alone amid outrage over Elon Musk’s role with DOGE, slowing sales, and protests at Tesla dealerships. Tthe electric vehicle maker has also warned that reciprocal tariffs as part of the Trump-instigated trade war could harm it.