Stocks Rebound As Traders Weigh Earnings, PCE Data: Markets Wrap
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(Bloomberg) -- Stocks ticked higher on Friday as fresh data that bolstered hopes for the Federal Reserve to downshift aggressive rate hikes overcame earlier concerns about weak company earnings.
The S&P reversed a 0.3% drop, with consumer discretionary and communication services stocks leading gains. The tech-heavy Nasdaq 100 also bounced higher, despite a slump in chipmaker Intel Corp. after warning “significant economic uncertainty” would hurt profits. American Express Co. rallied on upbeat earnings forecasts.
The personal consumption expenditures core price index, which excludes food and energy, rose 4.4% in December from a year earlier, Commerce Department data showed Friday. The overall gauge climbed 5% year-over-year, still well above the Fed’s 2% goal but both were the slowest paces since late 2021.
US PCE Inflation Cools Further, Paving Way for Smaller Fed Hike
Hopes are high for the Fed deliver a 25 basis-point increase at next week’s meeting — shifting away from last year’s bigger moves — but expectations for end-2023 rate cuts are “a step too far,” according to Erick Muller, head of product and investment strategy at Muzinich & Co. Ltd.
“We will probably see the Fed say ‘we are entering the final phase but listen carefully guys: we will continue to raise rates,” Muller said. “A lot of volatility in rates will depend on the path of inflation from here.”
While US stocks remain on track for their best month since July, the rally has eased off in recent days as company earnings trickle out.
“You are seeing more and more companies turn cautious about the earnings outlook,” said Dan Boardman-Weston, chief investment officer at BRI Wealth Management. “If there is a recession, earnings will have to decline and price-to-earnings ratios have to come down.”
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