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NEW YORK (AP) — U.S. stocks hovered near all-time highs Friday as Wall Street heads toward the end of its 12th winning week in the past 13 weeks.
The S&P 500 fell 0.2% in afternoon trading after hitting record highs for five consecutive days. As of 2:25 p.m. ET, the Dow Jones Industrial Average was up 18 points, or 0.1%, and the Nasdaq Composite was down 0.4%.
Intel’s 12.1% decline dragged down the market, even though the company reported stronger profits than analysts expected for the final three months of 2023. Sales and profit forecasts for early 2024 were below Wall Street expectations.
Visa also fell 1.7% despite reporting better-than-expected results. Analysts called the numbers solid, but highlighted how the company has accounted for some slowing trends in January so far.
Nevertheless, the US stock market is coming off another winning week as reports continue to suggest that inflation is slowing while the economy continues to rise. The unexpected backdrop is raising hopes that Wall Street’s dream scenario will come true. That is, a scenario in which economic resilience boosts corporate profits and inflation moderates enough for the Federal Reserve to cut interest rates multiple times this year.
Friday’s latest report is Fed measure of inflation prefers to behave as expected in December. According to this measure, the overall inflation rate for the month was 2.6%, matching the rate in November.
The Fed is focusing more on inflation after ignoring food and fuel prices, which can zigzag sharply from month to month. The figure fell from 3.2% to 2.9%, slightly better than economists expected.
At the same time, U.S. consumer spending rose more than expected in December. This allayed concerns that the resilience of the U.S. economy, which has so far refused to slide into a long-expected recession, could mean upward pressure on inflation.
There is still hope that the labor market will soften and inflationary pressures will ease further in the coming months, but this will not be enough to halt economic growth. So the market is hoping for what Gregory Daco, chief economist at EY, calls “the ‘holy grail’ of non-inflationary growth.”
In the bond market, U.S. bond yields rose year-on-year in response to the report, but have since risen slightly. The yield on the 10-year U.S. Treasury rose to 4.16% from 4.12% late Thursday.
The Federal Reserve is likely to end next week’s meeting with interest rates on hold, but traders are divided on whether they can start cutting rates in March. That’s a sharp turnaround from the past two years, when the Fed raised its key interest rate to its highest level since 2001, hoping to hit investment prices enough to slow the economy and curb inflation.
Traders are also betting the Fed will cut rates more times than the three indicated this year, according to CME Group data.
Critics say overzealousness could be setting financial markets up for disappointment after a massive rally in recent months.
But for now, the mood on Wall Street is still mostly lively.
American Express posted a big gain, jumping 6.6% even though its latest quarter’s results were weaker than expected. The company gave stronger forecasts for sales and profits for 2024 than analysts expected, while also announcing plans to increase dividends to investors.
Colgate-Palmolive rose 2% after the company, which controls more than 40% of the global toothpaste market, reported stronger profit and revenue in its latest quarter than analysts expected.
In overseas stock markets, indexes rose in most of Europe, but were mixed in Asia.
Hong Kong’s Hang Seng fell 1.6%, giving back some of this week’s strong gains spurred by moves by Chinese authorities to stabilize markets and the world’s second-largest economy. Japan’s Nikkei Stock Average fell 1.3%, halting its steep gains so far this year.
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AP Business writers Yuri Kageyama and Matt Ott contributed.
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