Dow closes up more than 100 points as earnings season begins, stocks book best week of gains in 2 months

How stock indexes traded

• The Dow Jones Industrial Average
  DJIA,
  +0.33%
  rose 112.64 points, or 0.3%, to close at 34,302.61.

• The S&P 500
  SPX,
  +0.40%
  added 15.92 points, or 0.4%, to finish at 3,999.09.

• The Nasdaq Composite
  COMP,
  -1.10%
  gained 78.05 points, or 0.7%, to end at 11,079.16.

For the week, the Dow rose 2%, the S&P 500 advanced 2.7% and the Nasdaq gained 4.8% gain.

Read: Goldman Sachs sees these ‘prospective’ total returns across assets in 2023

What drove markets

Major stock indexes posted their best week of gains in two months on Friday after companies began reporting their fourth-quarter results, with big banks kicking off the earnings season.

No big surprises have come from the banks’ earnings results so far, with Bank of America Corp. and JPMorgan Chase & Co. indicating a potentially mild recession this year, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial. 

“I think the base case for most of the market right now is that we’re going to see a mild recession,” Saglimbene said in a phone interview Friday. “I don’t think anything that was said across bank earnings today surprised investors.”

Typically, the release of megabank earnings marks the unofficial start of the U.S. earnings reporting season, and market analysts will be watching closely this quarter for indications of how America’s largest companies are bracing for an expected economic downturn driven by higher interest rates.

JPMorgan
JPM,
+2.52%,
Bank of America
BAC,
+2.20%,
Wells Fargo & Co.
WFC,
+3.25%
and Citigroup
C,
+1.69%
were among banks that reported their fourth-quarter earnings Friday. JPMorgan was the top performer in the Dow Jones Industrial Average, with its shares closing 2.5% higher, FactSet data show.

Read: JPMorgan, Wells Fargo, Bank of America and Citi beat earnings expectations, but worries about ‘headwinds’ remain

Earnings will continue to be a “big focus” for markets this month, according to Saglimbene. “Analysts took down estimates pretty aggressively in the fourth quarter,” he said. “So the bar is pretty low for companies. We’ll see if they can hurdle past that.”

In U.S. economic data released Friday, the University of Michigan consumer sentiment index climbed in January to its highest level in nine months, as expectations for the rate of inflation one year out moderated.

“Signs that inflation has peaked and is moderating slowly kind of eases some of the anxiety that we’re going to see runaway inflation this year,” said Saglimbene.

A reading from the consumer-price index on Thursday showed U.S. inflation fell in December. Many investors are expecting that the Federal Reserve will slow its pace of interest rate hikes this year as the cost of living has cooled.

Read: Inflation slows again and clears path for slower Fed rate hikes

Stocks on Thursday pushed higher after St. Louis Federal Reserve Bank President James Bullard said the probability of a soft landing for the economy has increased due to “encouraging” inflation data.

Read: Why the stock market isn’t impressed with the first monthly decline in consumer prices in more than 2 years

Steve Sosnick, chief strategist at Interactive Brokers, said by phone Friday that he still favors consumer-staples stocks and companies with “more steady streams than more cyclical streams” of income. “If you’re looking at an economy that’s likely to slow down, it’s really hard for me to think that somehow ‘the cyclicals’ will be immune from the economic cycle,” he said.

Read: Why earnings season could be a ‘market-moving event’

Companies in focus

• JPMorgan
  JPM,
  +2.52%
  shares gained 2.5% after reporting fourth-quarter earnings and revenue before the bell that topped Wall Street expectations. The bank said a mild recession is now the “central case.”

• Wells Fargo
  WFC,
  +3.25%
  shares rose 3.3% after reporting falling profits, as it was hit by a recent settlement and the need to build reserves.

• Bank of America
  BAC,
  +2.20%
  shares gained 2.2% after reporting earnings per share of 85 cents last quarter, above the 77 cents a share expected by analysts. Revenue also beat expectations. However, the bank’s net interest income fell slightly below expectations despite jumping interest rates.

• Delta Air Lines Inc.
  DAL,
  -3.54%
  reported fourth-quarter profit and revenue before the bell that beat expectations. Shares of the airline fell 3.5%.

• Tesla Inc.
  TSLA,
  -0.94%
  shares fell after the company cut prices in the U.S. and Europe again, according to listings on the company’s website Thursday night. Tesla finished down 0.9%.

• Shares of UnitedHealth Group Inc.
  UNH,
  -1.23%
  dropped 1.2% after the health-insurance giant shared its results.

• BlackRock Inc.
  BLK,
  +0.00%
  shares closed about flat after the asset-management giant reported a decline in fourth-quarter results.

—Barbara Kollmeyer contributed to this article.