US stocks ended the week higher as investors weighed the latest batch of corporate results and economic data and looked ahead to the Federal Reserve’s upcoming interest rate decision next Wednesday.
Wall Street’s benchmark S&P 500 added about 0.2 per cent on Friday to gain 2.5 per cent for the week. The tech-heavy Nasdaq Composite finished almost 1 per cent higher on the day, bringing its advance over the past five sessions to 4.3 per cent.
Reporting season steps up a gear next week, but several well-known companies have in recent days provided results and outlooks for investors’ consideration.
Oil major Chevron slipped 4.4 per cent on Friday as it reported record full-year earnings, but a decline in fourth-quarter profits from three months earlier. Credit card company American Express jumped 10.6 per cent after it reported a 25 per cent increase in full-year revenue to a record of almost $52.9bn and issued a better than forecast outlook for 2023.
Shares in Intel fell 6.4 per cent after the chipmaker said after close of trading on Thursday that revenue in the current quarter was forecast to come in about $3bn below analysts’ expectations.
Shares of Tesla surged 11 per cent, adding double-digit gains for the second session in a row after Elon Musk signalled strong demand for the carmaker’s vehicles.
Friday’s stock market move came as data showed real consumer spending fell 0.3 per cent in December following a 0.2 per cent decline the previous month. Paul Ashworth, Capital Economics’ chief North America economist, said this suggested the US was “on the precipice of a recession and may already have fallen off the ledge”.
Other figures showed core personal consumption index increased 0.3 per cent in December as expected after rising 0.2 per cent month on month in November. The core PCE index omits energy and food inflation and is also the Fed’s preferred inflation gauge.
Although still near a multi-decade high, headline US inflation fell to its lowest level in more than a year in December. Fed chair Jay Powell has insisted core inflation “often gives a more accurate indicator of where overall inflation is headed”.
Government bonds remained under pressure, with the yield on the 10-year US Treasury 0.02 percentage points higher at 3.51 per cent after the inflation figures were published. Bond yields move inversely to prices.
US equities rallied on Thursday after gross domestic product for the fourth quarter of 2022 came in ahead of projections, rising at an annualised pace of 2.9 per cent. That was above the 2.6 per cent economists forecast, marking a milder slowdown from 3.2 per cent in the previous quarter.
“With inflation well above target, this fully justifies ongoing interest rate increases from the Federal Reserve,” said James Knightley, chief international economist at ING.
“Dig a little deeper,” however, and it seemed “we have good growth but not for great reasons”, Knightley added. Consumer spending rose less than expected, residential investment fell sharply and non-residential fixed investment, “basically business capex”, grew just 0.7 per cent.
Instead, much of the rise in GDP reflected “increasingly involuntary” inventory building by mining, construction and manufacturing groups as consumer demand continued to soften, he said.
Investors now turn their attention to the Fed’s policy meeting next week, at which the US central bank is expected to raise rates by a quarter percentage point, marking a slowdown from the 0.5 percentage point move implemented in December. Powell’s forward guidance and the language he adopts during a press conference after the rate decision is announced are therefore likely to be the focus of attention.
A measure of the dollar’s strength against a basket of six currencies was up 0.1 per cent on Friday, while prices for Brent crude, the international oil benchmark, settled 0.9 per cent lower at $86.66 a barrel, erasing earlier gains. US benchmark West Texas Intermediate settled 1.6 per cent lower at $79.68.
In Asia, Hong Kong’s Hang Seng index rose 0.5 per cent, Japan’s benchmark Nikkei 225 increased almost 0.1 per cent and South Korea’s Kospi gained 0.7 per cent. Markets in China are closed for the lunar new year holiday.
Europe’s region-wide Stoxx 600 closed up 0.3 per cent, Germany’s Dax rose 0.1 per cent and London’s FTSE 100 was marginally higher.