US: Wall Street ends higher, notches weekly gains as Fed meeting looms

Wall Street advanced on Friday (Jan 27), marking the end of a rocky week in which economic data and corporate earnings guidance hinted at softening demand but also economic resiliency ahead of next week’s Federal Reserve monetary policy meeting.

All three major US stock indexes ended the session green, with the Nasdaq, powered by mega-cap momentum stocks, enjoying the biggest gain.

From last Friday’s close, the S&P and the Dow posted their third weekly gains in four, while the tech-laden Nasdaq notched its fourth straight weekly advance.

So far in the early weeks of 2023, the Nasdaq has jumped 11 per cent, while the S&P 500 and the Dow have gained 6 per cent and 2.5 per cent, respectively.

“It’s a nice end to another solid week of what’s shaping up to be a historically strong month,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “It’s a realisation that inflation continues to come down quickly and that is alleviating a lot of worries regarding the economy.”

The Commerce Department’s hotly anticipated personal consumption expenditures (PCE) report arrived largely in line with consensus, showing softening demand and cooling inflation – which is exactly what the Federal Reserve’s restrictive interest rate hikes are intended to accomplish.

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“(The PCE report) is another building block to the inflation data we’ve been seeing recently,” Detrick added. “Supply chains continue to open up and improve, opening the door for the Fed to end its aggressive rate hiking cycle.”

Fed chair Jerome Powell has clearly stated that the central bank’s battle against decades-high inflation is far from over, however. Financial markets still believe the central bank will hike the Fed funds target rate by another 25 basis points at the conclusion of next week’s policy meeting.

Fourth-quarter earnings season is running on all cylinders, with 143 of the companies in the S&P 500 having reported. Of those, 67.8 per cent have beaten Street expectations, slightly better than the 66 per cent long-term average, but well below the 76 per cent beat rate over the past four quarters, according to Refinitiv.

Analysts now see aggregate S&P 500 earnings falling 2.9 per cent year on year, compared with the milder 1.6 per cent annual drop seen on Jan 1, per Refinitiv.

The Dow Jones Industrial Average rose 28.67 points or 0.08 per cent to 33,978.08, the S&P 500 gained 10.13 points or 0.25 per cent to 4,070.56 and the Nasdaq Composite added 109.3 points or 0.95 per cent to 11,621.71.

Among the 11 major sectors of the S&P 500, consumer discretionary led the percentage gainers, while energy suffered the largest percentage loss, down 2 per cent.

Shares of Intel Corp plunged 6.4 per cent after the chipmaker provided dismal earnings projections. Chevron posted record 2022 profit, but its fourth-quarter earnings fell short of expectations, dragging the stock down 4.4 per cent.

Rival payment companies American Express and Visa reported consensus-beating results, easing worries of waning consumer demand. Their shares jumped 10.5 per cent and 3 per cent, respectively.

Next week, in addition to the Fed meeting and January employment data, a string of high profile earnings reports are on tap, notably from Apple, Amazon.com, Alphabet and Meta Platforms, among others.

Advancing issues outnumbered declining ones on the New York Stock Exchange by a 1.40-to-1 ratio; on Nasdaq, a 1.34-to-1 ratio favoured advancers.

The S&P 500 posted 15 new 52-week highs and no new lows; the Nasdaq Composite recorded 94 new highs and 32 new lows.

Volume on US exchanges was 11.88 billion shares, compared with the 11.1 billion average over the last 20 trading days. REUTERS