US Stocks Gains and end the week Higher
US stocks finished the week higher as investors digested the latest corporate earnings and economic data and anticipated the Federal Reserve’s interest rate decision next Wednesday. The S&P 500 index gained approximately 0.2% on Friday, bringing its weekly gain to 2.5%. The tech-heavy Nasdaq Composite finished nearly 1% higher on the day, pushing its five-session gain to 4.3 percent.
The reporting season picks up next week, but numerous well-known corporations have offered results and outlooks for investors to examine in recent days. Chevron fell 4.4% on Friday after reporting record full-year earnings but a drop in fourth-quarter profits from three months earlier. American Express rose 10.6 percent after reporting a 25% increase in full-year revenue to a record of over $52.9 billion and issuing a better-than-expected estimate for 2023.
Intel shares plummeted 6.4% after the chipmaker revealed after the close of Thursday that sales in the current quarter would be around $3 billion lower than expected by analysts. In 2023, the line chart shows that semiconductor stocks have risen. Tesla shares rose 11%, adding double-digit gains for the second session in a row, as Elon Musk indicated high demand for the automaker’s vehicles.
The stock market’s reaction on Friday occurred as statistics indicated that real consumer expenditure declined 0.3% in December, following a 0.2% drop the previous month. Paul Ashworth, Capital Economics’ senior North America economist, said the US was “on the precipice of a recession and may already have tumbled off the ledge.” Other data revealed that the core personal consumption index grew 0.3% in December, as predicted, after increasing 0.2% month over month in November. The Fed’s preferred inflation gauge is the core PCE index, which excludes energy and food prices.
In December, headline US inflation fell to its lowest level in more than a year but remained near a multi-decade high. Fed chair Jay Powell has said core inflation “often delivers a more accurate picture of where total inflation is headed.” Government bonds were under pressure, with the 10-year US Treasury yield rising 0.02 percentage points to 3.51 percent after the inflation numbers were released. Bond yields move in the opposite direction of bond prices.
US shares rose on Thursday after the GDP for the fourth quarter of 2022 came in ahead of expectations, growing at an annualised rate of 2.9%. This was higher than the 2.6 percent predicted by experts, indicating a slower slowdown from 3.2 percent in the previous quarter.
“With inflation substantially above goal, this completely justifies the Federal Reserve’s continuous interest rate increases,” said James Knightley, chief international economist at ING. “Dig a little deeper,” and it became clear that “we have good growth but not for wonderful reasons,” Knightley added. Consumer spending increased less than projected, while residential investment declined substantially and non-residential fixed investment, or “essentially business capex,” increased only 0.7%.
Instead, he said that much of the increase in GDP reflected “increasingly involuntary” inventory accumulation by the mining, construction, and manufacturing sectors as consumer demand remained weak. Investors are now focusing on the Fed’s policy meeting next week, when the US central bank is likely to raise rates by a quarter percentage point, slowing from the 0.5 percentage point increase adopted in December. Powell’s forward guidance and the words he uses during a news conference following the announcement of the rate decision are, therefore, likely to be the focus of attention.
A gauge of the dollar’s strength versus a basket of six currencies rose 0.1% on Friday, while Brent crude, the international oil benchmark, fell 0.9% to $86.66 per barrel, erasing earlier gains. West Texas Intermediate, the US benchmark, fell 1.6% to $79.68. In Asia, the Hang Seng index in Hong Kong climbed 0.5%, the Nikkei 225 in Japan gained almost 0.1%, and the Kospi in South Korea gained 0.7%. China’s markets are closed for the lunar new year vacation. The Stoxx 600 index in Europe gained 0.3%, the Dax in Germany gained 0.1%, and the FTSE 100 in London gained 0.1%.
