Shares rose on Friday as investors digested bank earnings and bet that inflation would ease in 2023.
All major indices fought their way into the green after starting the day deep in the red. The Dow Jones Industrial Average rose 112.64 points, or 0.33%, to 34,302.61. The S&P 500 was up 0.4% to 3,999.09 and the Nasdaq Composite was up 0.71% to 11,079.16.
The S&P and Nasdaq each posted their second straight week of gains and their best weekly performance since November. The tech-heavy Nasdaq was the week’s outperformer after rising 4.82%. The S&P gained 2.67% and the Dow gained 2%.
Bank earnings weighed on stocks earlier in the day, but sentiment turned as investors seemed to ignore negative news that was to some extent expected anyway, according to Ross Mayfield, investment strategy analyst at Baird.
“It wasn’t really expected that the financial industry would have a blockbuster quarter,” he said. “It’s just a small sentiment boost, and with banks leading the earnings season, they can sort of set the tone for how investors see the big picture.”
“Honestly, the market has rallied quite nicely over the last few weeks with no catalyst in place and as such there could be profit-taking from the earnings season,” Mayfield added.
Wells Fargo, whose profit was halved last quarter, said it was bracing for the economy “to get worse than it’s been in recent quarters.”
JPMorgan Chase reported earnings that beat expectations, but the bank warned that it is setting aside more money to cover loan losses because a “mild recession” is its “key case.” The bank reported a provision for loan losses of $2.3 billion in the quarter, a 49% increase from the third quarter.
The CEOs of Citigroup and Bank of America also said they expect a “mild recession.”
Elsewhere, Delta Air Lines reported earnings and revenue that beat estimates for the final quarter of 2022. However, the stock slipped about 4%. Investors have been waiting for these results to gain more insight into the health of the economy.
Turning to economic data, the University of Michigan Consumer Sentiment Survey showed the one-year inflation outlook slipped to 4%, the third straight monthly decline and the lowest since April 2021.
This was followed by December’s CPI report, released on Thursday, which showed prices down 0.1% from November. While prices rose 6.5% year-on-year, the results fueled hopes that the US Federal Reserve may soon be slowing its rate hike.