Nasdaq, S&P, Dow waver as traders take in earnings, inflation data

U.S. stocks on Friday stumbled as market participants absorbed more quarterly results from major companies, while also parsing through data that showed further signs of moderation in inflation.

Wall Street’s major indices opened trading mixed, and have since seesawed. The tech-heavy Nasdaq Composite (COMP.IND) was up 0.38% to 11,556.69 points in morning trade. The benchmark S&P 500 (SP500) was 0.06% higher to 4,062.73 points. The blue-chip Dow (DJI) slipped 0.01% to 33,945.77 points.

Of the 11 S&P sectors, six were trading in the green, led by Consumer Discretionary and Communication Services. Energy and Health Care topped the losers.

“Markets deciphered a lot of mixed clues yesterday and, after some cause for concerns, decided that it was easier to shrug it all off and drive equities to fresh 2023 highs,” Deutsche Bank’s Jim Reid said.

“We still think we are in a positive sweet spot but there was certainly stuff to worry about in the US data yesterday. It depends on whether you saw the glass half full or half empty element of it.”

On Friday, shares of Intel (INTC) fell nearly 8% and weighed heavily on both the Dow and the S&P 500, after the semiconductor giant issued a gloomy forecast. Oil and gas major Chevron (CVX) also weighed after missing earnings expectations.

Conversely, American Express (AXP) surged more than 10% after the credit card issuer posted strong guidance and said it would boost its dividend.

Earnings provided a catalyst for moves in several other stocks. Eastman Chemical (EMN) and Colgate-Palmolive (CL) were among the top percentage losers on the S&P 500 after their results were met with disappointment. On the other hand, L3Harris (LHX) was among the top S&P gainers after investors cheered its results.

On the economic data front on Friday, December personal income and spending numbers came in before the opening bell. Personal income was in line with forecasts at +0.2% M/M while personal spending was -0.3% versus the consensus -0.1%.

The data also included the Federal Reserve’s favorite inflation gauge. The core PCE price index rose to 4.5% Y/Y in December, slightly above expectations but moderating from 4.7% in the prior month.

“Slowing inflation should minimize the drop in real spending, and income growth seems likely to be consistent with the Fed’s inflation target looking at the monthly change,” UBS’ Paul Donovan wrote.

The Fed’s first monetary policy meeting of the new year is next week. The central bank is widely anticipated to downshift to a 25 basis point rate hike at the end of the meeting, and today’s data should reinforce that.

Additionally, December pending home sales figures came in stronger at 2.5% versus the forecasted -0.9% figure. Moreover, the final measure of Michigan sentiment for December came in at 64.9 versus the anticipated preliminary measure of 64.6.

Turning to the bond markets, yields were higher at the end of a week that has seen very strong demand in Treasury auctions.

The 10-year Treasury yield (US10Y) was up 4 basis points to 3.53%. The 2-year yield (US2Y) was up 4 basis points to 4.22%.

“The big question… is whether the Fed could consider outright selling some bonds off its books, and thereby engage in a harder version of quantitative tightening,” ING said. “It would be huge if it did. There is certainly an appetite for bonds in the market if the recent Treasury auctions are anything to go by.”