NEW YORK – A strong week for Wall Street ended with modest gains on Friday, sending the stock market to its highest level since early December.
The S&P 500 rose 0.2% to record its third week of gains in the last four and was near its highest since the summer before falling later on the day. He has recovered into January as he becomes more confident that inflation is in a steady decline which will hopefully ease the pressure on the economy and markets.
The Dow Jones Industrial Average rose 28 points, or 0.1%, while the Nasdaq Composite gained 0.9%.
Leading the way was American Express, which rose 10.5% despite reporting weaker-than-expected earnings and sales for the most recent quarter. It provided earnings guidance through 2023 that beat Wall Street expectations and announced a planned dividend increase.
Another big gain for Tesla stock also supported the market. It surged 11% following its stronger-than-expected late-2022 earnings report released earlier in the week.
They helped erase a 6.4% loss for Intel after the chipmaker issued a staggering warning. Not only did its revenue and earnings fall short of expectations for the most recent quarter, but it also forecast this quarter’s revenue to be more than $2 billion below analysts’ expectations.
Overall, the S&P 500 rose 10.13 points to 4,070.56. The Dow was up 28.67 to 33,978.08 and the Nasdaq was up 109.30 to 11,621.71.
Hasbro fell 8.1% after “underperforming” last holiday shopping season and is likely to report a 17% decline in sales for the fourth quarter. The company will cut about 1,000 jobs to cut costs.
So far, the labor market has proven remarkably resilient despite a weakening overall economy. Almost all of the high-profile layoffs have come from the tech industry, which was rushing to expand after the pandemic spurred demand for tech.
Earnings report season is entering its heart, and companies are offering mixed results and forecasts. This has contributed to some large swings in the markets.
Two competing big ideas have rocked Wall Street lately. On the one hand, there are concerns about a sharp drop in earnings and a deep recession for the economy after all the Federal Reserve’s rate hikes last year, which should dampen inflation. On the other hand, there are hopes that a slowdown in inflation could allow the Fed to ease interest rates.
The market is partially trying to reconcile that weak earnings and a slowdown in demand may be needed for inflation to cool further, said Keith Buchanan, portfolio manager at Globalt Investments.
“It’s like this is the medicine that the economy needs to take,” he said.
Economic reports on Friday confirmed the latest data points suggesting inflation is moderating further. The Fed’s preferred metric, which excludes food and energy costs, was up 4.4% in December from a year earlier. That was down from inflation of 4.7% in November.
Reports also showed that Americans’ income growth slowed in December, while consumer spending fell slightly more than expected.
A separate report says US consumers are also downgrading their inflation expectations for the coming year. Long-term inflation expectations remain about where they have been for most of the past 18 months, according to the University of Michigan.
Economists said Friday’s data is likely to keep the Fed on track to hike interest rates by 0.25 percentage points at next week’s meeting. That would be a step down from its 0.50-point rise last month and four consecutive 0.75-point gains before that.
Smaller increases would mean less additional pressure on the economy, which has already wreaked havoc on housing and other sectors due to the rise in rates over the last year.