NEW YORK (AP) — Wall Street capped its 10th winning week in the last 11 with a mixed ending on Friday after an encouraging report on inflation.Thank you for reading this post, don't forget to subscribe!
The S&P 500 rose 0.1% after earnings reporting season began with mixed results from Delta Air Lines, JPMorgan Chase and others. The Dow Jones Industrial Average fell 118 points, or 0.3%, following the results that led to heavy losses for UnitedHealth Group. The Nasdaq was basically flat and rose less than 0.1%.
Stocks have been rising to records for months, pulling the S&P 500 to within 0.3% of its all-time high, on hopes that inflation is slowing enough for the Federal Reserve to cut interest rates several times this year.
Treasury yields have already sunk in the bond market on those expectations, and fell further after a report that inflation at the U.S. wholesale level last month was weaker than economists expected. The data boosted expectations for a rate cut a day after another report showed inflation was higher than expected at the consumer level.
The yield on 10-year Treasuries dropped to 3.94% from about 4% just before the report was released. In October, it was above 5% and at its highest level since 2007. Easy rates and yields ease pressure on the economy and the financial system, while raising prices for investments.
The two-year Treasury yield, which more closely tracks expectations for the Fed, fell to 4.17% from 4.27% ahead of the release of the wholesale inflation report. Traders again bet on whether the Federal Reserve will begin cutting interest rates in March, according to CME Group data.
Traders are largely betting that the Fed will cut its key interest rate six or more times by 2024. This would be a much more aggressive track than the Fed has indicated. She also warned that she could raise rates further if inflation refuses to move toward her 2% target. The federal funds rate is already at its highest level since 2001.
“The danger of Fed fine-tuning is that they can get careless when the economy is burning,” said Brian Jacobsen, chief economist at Annex Wealth Management. “If they are data-dependent, it means they are looking in the rearview mirror. Now they need to turn their gaze forward through the windshield.
Interest rates are one of the main levers that determine where stock prices go. The second is how much profit companies are making, and analysts expect the S&P 500 to deliver a second consecutive quarter of growth after stumbling earlier due to the burden of higher inflation.
The reporting season for the end of 2023 unofficially started on Friday with reports from banks.
JPMorgan Chase dropped 0.7% after reporting weaker-than-expected results for the last three months of 2023.
UnitedHealth Group fell 3.4% despite topping analysts’ profit forecasts. The health care giant’s medical costs soared, worrying investors.
Delta Airlines sank 9% even though it reported stronger profit and revenue in the final three months of 2023 than analysts expected. The carrier’s estimated range for upcoming full-year profit indicates it may be lower than analysts expected.
Airlines and other travel-related companies were also affected by the rise in oil prices, putting pressure on their fuel costs. United Airlines fell 10.6%, and Norwegian Cruise Line Holdings fell 4.3%.
Crude oil prices climbed on concerns of possible supply disruption after Yemen’s Houthi rebels vowed fierce retaliation for US and Britain attacks against them. A barrel of benchmark U.S. crude rose 66 cents to $72.68. Brent crude, the international benchmark, rose 88 cents to $78.29 a barrel.
That helped shares of energy companies lead the S&P 500 with an overall gain of 1.3%. Valero Energy rose 2.8% and Marathon Oil climbed 2%.
All told, the S&P 500 rose 3.59 points, to 4,783.83. The Dow fell 118.04 to 37,592.98 and the Nasdaq Composite added 2.57 to 14,972.76.
In stock markets overseas, Japan’s Nikkei 225 jumped 1.5% during a strong week that took it to levels unseen since the 1990s, when the country’s bubble economy began to fade. Indices were low in much of Asia but high in Europe.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
Stan Choe, The Associated Press