US stocks rose on Friday as inflation is looking to cool in 2023
Stocks rose on Friday as investors digested bank earnings and bet inflation would ease in 2023.
All of the major indexes fought their way into the green after beginning the day deep in the red. The Dow Jones Industrial Average rose 0.33 per cent. The S&P 500 rose 0.40 per cent, and the Nasdaq Composite advanced 0.71 per cent.
The S&P and Nasdaq each posted their second consecutive positive week and best weekly performance since November. The tech-heavy Nasdaq was the outperformer for the week after rising 4.82 per cent. The S&P advanced 2.67 per cent, and the Dow added 2 per cent.
The S&P 500 sectors were mostly mixed on Friday, with Consumer Discretionary, Financials and Materials leading the pack, closing 0.97 per cent, 0.71 per cent and 0.67 per cent higher, whilst Real Estate was the worst performer, closing 0.61 per cent lower.
Bank earnings weighed on equities to start the day, but sentiment reversed as investors appeared to shrug off negative news that was expected to some degree, according to Ross Mayfield, investment strategy analyst at Baird. “Financials weren’t really quite expected to have a blockbuster quarter,” he said. “It’s just providing a bit of a sentiment wave, and since the banks lead earnings season they can kind of set the tone for how investors look at the broader picture.”
Wells Fargo, whose profits for the last quarter had been cut by half, said it’s preparing for the economy to “get worse than it’s been over the last few quarters.”
JPMorgan Chase posted revenue that beat expectations, but even so, the bank warned it’s setting aside more money to cover credit losses because a “mild recession” is its “central case.” The bank posted a $2.3 billion provision for credit losses in the quarter, a 49 per cent increase from the third quarter.
Goldman Sach’s, who last week stated that it would let off 3200 staff, or roughly 6 per cent of their US workforce, have stated that its consumer lending business has lost about $3 billion since 2020, revealing for the first time the costly toll of the Wall Street giant’s Main Street push.
Elsewhere, Delta Air Lines reported earnings and revenue that beat estimates for the final quarter of 2022. However, the stock slid 3.5 per cent. Investors have been awaiting these results to gain more insight into the health of the economy.
Whilst in the crypto space, Massive leading cryptocurrency platform, Crypto.com announced on friday that it is cutting a whopping fifth of its global workforce, in a second round of layoffs in six months, after a plunge in the value of many cryptocurrencies and the collapse of rival FTX.
Interestingly, this has seemed to have very little impact on the price of major cryptocurrencies like Bitcoin and Ethereum so far, whose prices have increased by roughly 18 per cent and 15 per cent over the past 5 days.
In economic data, the University of Michigan consumer sentiment survey showed the one-year inflation outlook down to 4 per cent, the third straight monthly decrease and the lowest level since April 2021.
That followed December’s CPI report, released Thursday, which showed prices declined 0.1 per cent over November. While prices rose at a 6.5 per cent pace compared to the previous year, the results heightened hopes that the Federal Reserve may soon slow its hiking.
However, despite the signs that inflation has started to recede, economists still expect higher interest rates to push the U.S. economy into a recession in the coming year, according to The Wall Street Journal’s latest quarterly survey.
On average, business and academic economists surveyed put the probability of a recession in the next 12 months at 61 per cent, little changed from the 63 per cent figure from the survey conducted in October. Both figures are historically high outside actual recessions.
Futures
The SPI futures are pointing to a 0.5 per cent gain.
Currency
One Australian dollar at 7:30 AM has strengthened compared to the US dollar on Friday buying 69.79 US cents (Fri: 69.67 US cents).
Commodities
Iron ore futures are pointing to a 1.0 per cent fall.
Gold gained 1.2 per cent. Silver added 1.5 per cent. Copper rose 0.5 per cent and oil gained 1.9 per cent.
Figures around the globe
Across the Atlantic, European markets closed higher. Paris rose 0.69 cent, Frankfurt gained 0.19 per cent and London’s FTSE closed 0.64 per cent higher.
In Asian markets, Tokyo’s Nikkei fell 1.25 per cent, Hong Kong’s Hang Seng gained 1.04 per cent and China’s Shanghai Composite closed 1.01 per cent higher.
On Friday, the Australian sharemarket added 0.66 per cent to close at 7,328.
Dividends payable
GLG Corp (ASX:GLE)
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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