By Stephen Culp
NEW YORK (Reuters) – The S&P 500 advanced on Friday, rebounding from selloff to rally and then paring gains near the end of a tumultuous week marked by heightened volatility as investors weighed mixed corporate earnings, geopolitical turmoil and an increasingly aggressive Federal Reserve.
The Nasdaq joined the S&P 500 in positive territory, with tech shares, led by Apple Inc, doing the heaviest lifting. But the Dow reversed its gains and was last slightly lower.
The three indexes remain on track to close below last Friday’s levels, marking the S&P 500’s fourth straight weekly drop, its longest losing streak since September 2020, and closing the book on a week defined by wild intraday swings.
“(The week) reminds me of the Chiefs-Bills (football) game which came down to the last 13 seconds and the last person with the ball won,” said Matthew Keator, managing partner with the Keator Group, a wealth management firm in Lenox, Massachusetts. “The last hour of trading has determined where we ended up.”
Even with Friday’s gains, the S&P 500 has plunged by more than 8% so far this year, with the Nasdaq and the Dow posting respective drops of about 13% and 5% over the same time period.
“A lot of what has happened this month is the market is pulling forward the expectation of the recalibration of the Fed’s balance sheet, and the bad news in terms of the growth story,” Keator added. “Some of the geopolitical tensions in Eastern Europe are casting a bit of a cloud over everything as well.
“You put that together, you have a recipe for volatility.”
Economic data released on Friday showed a drop in consumer spending coupled with the lowest consumer sentiment reading in a decade, and year-on-year Core PCE prices – the Federal Reserve’s preferred inflation yardstick – came in at 4.9%, slightly hotter than expected.
The graphic below shows how far core PCE and other major indicators have risen above the Fed’s average annual 2% target.
(Graphic: Inflation, https://graphics.reuters.com/USA-STOCKS/gdvzynqmopw/inflation.png)
The Fed made it clear at the conclusion of its monetary policy meeting on Wednesday that they intend to take off their gloves and combat stubbornly persistent inflation by hiking key interest rates more aggressively than many market participants expected.
The Dow Jones Industrial Average fell 56.84 points, or 0.17%, to 34,103.94, the S&P 500 gained 13.91 points, or 0.32%, to 4,340.42 and the Nasdaq Composite added 80.66 points, or 0.6%, to 13,433.45.
Among the 11 major sectors of the S&P 500, tech stocks were enjoying the largest percentage gains.
Fourth-quarter reporting season was firing on all cylinders, with 168 of the companies in the S&P 500 having reported. Of those, 77% have delivered consensus-beating results, according to Refinitiv data.
But investors have been increasingly focused on guidance, and the extent to which companies expect ongoing global supply challenges to affect their bottom line going forward.
Data storage equipment maker Western Digital cited supply-chain headwinds after it reported lower than expected revenue and provided a disappointing forecast, sending its shares sliding 9.3%.
Caterpillar Inc fell 6.8% following the equipment maker’s warning that higher production and labor costs will pressure its profit margin.
Chevron Corp fell 5.2% on downbeat fourth-quarter profit.
However, Apple’s 4.9% jump gave the S&P 500 and the Nasdaq their biggest boost, the day after the company posted record iPhone sales in the holiday quarter.
Visa Inc surged 7.8% following its quarterly earnings beat driven by increased spending on international travel and e-commerce.
Declining issues outnumbered advancing ones on the NYSE by a 1.24-to-1 ratio; on Nasdaq, a 1.17-to-1 ratio favored decliners.
The S&P 500 posted 4 new 52-week highs and 24 new lows; the Nasdaq Composite recorded 11 new highs and 717 new lows.
(Reporting by Stephen Culp in New York; Additional reporting by Devik Jain and Bansari Mayur Kamdar in Bengaluru; Editing by Sriraj Kalluvila and Matthew Lewis)
