Wall Street Bounced. The Hard Part Starts Next Week.

U.S. stocks finished Friday with a strong rebound. The S&P 500, Dow and Nasdaq all rose about 1%, ending a difficult stretch on a better note as oil prices pulled back from recent highs.

That rebound should not be confused with the disappearance of the underlying problem. Oil remains elevated, inflation remains above the Federal Reserve’s target and Treasury yields have been pressing toward levels that tighten financial conditions across the economy. A one-day rally can relieve pressure without changing the trend.

The next major test is the Federal Reserve. Bond markets have increased their expectations for another rate increase, and investors will be listening as closely to the Fed’s language as to the rate decision itself. If officials signal that inflation requires a longer period of restrictive policy, markets will have to reprice not just the next meeting but the path for the rest of the year.

For ordinary investors, the important distinction is between volatility and fundamentals. Daily market moves are noisy. Borrowing costs, corporate earnings, fuel prices and consumer demand move more slowly and matter more. The question is whether companies can keep growing profits while households absorb higher rates and energy costs.

Friday’s bounce was real. So are the pressures underneath it. The better way to read the market is not “crisis over,” but “investors bought a little breathing room.” Next week will show whether that room lasts.