(New York) The New York Stock Exchange ended higher on Friday, increasingly convinced by indicators that a contained cooling of the US economy is possible, with an end to monetary tightening in sight.
The Dow Jones rose 0.08%, the NASDAQ index gained 0.95%, and the broader S&P 500 index gained 0.25%.
The tone of the session was set by the release of the PCE price index, which showed that inflation had slowed in December, to 5% year on year, from 5.5% the previous month.
Economists warn that “if inflation slows, it remains far too high to satisfy the Fed (US central bank)”, explained Oren Klachkin, of Oxford Economics, which should encourage the institution to raise its rates further.
But the market sees the US economy avoiding too deep a recession, which the Fed’s monetary tightening had made it fear since last spring.
“There’s definitely room for a soft landing,” said Art Hogan of B. Riley Wealth Management.
Operators also noted, on Friday, the 0.2% contraction in consumption over one month, more than the 0.1% expected.
“We expect consumption to be soft in the first quarter, but not to turn around,” explained Ian Shepherdson of Pantheon Macroeconomics, a scenario that would satisfy the stock market but also the Fed, which is seeking to curb consumption.
The institution’s monetary policy committee meets next Tuesday and Wednesday and Wall Street expects it to raise its key rate by a quarter of a point after its talks.
The decline in consumption was put into perspective by the consumer confidence index, published by the University of Michigan, which came out above projections, at 64.9 points against 64.6.
“Economic data this week has been good, earnings are better than feared and bond yields are calming down,” noted Art Hogan.
After months of a rollercoaster ride, bond rates indeed seem to be stabilizing. On Friday, the yield on 10-year US government bonds stood at 3.51%, against 3.49% the day before closing.
On the equities side, the New York market has experienced some disappointments with companies this week, at Intel, Microsoft, Dow or Hasbro, it has also been entitled to some satisfaction, in particular Tesla, AT & T or Texas Instruments.
On Friday, Wall Street welcomed results from Visa and American Express, which both said they saw no weakening in consumption.
AmEx (+ 10.54% to 172.31 dollars), announced that it expects growth in its turnover of between 15 and 17% in 2023 and forecasts a net profit higher than analysts’ forecasts so far.
He was sought after on Friday, despite a quarterly result and profit below expectations.
Investors also welcomed the results of Visa (+2.99% to 231.44 dollars), above their expectations, which were driven by the acceleration of tourism and travel abroad.
In a session favorable to technology stocks, Intel was a bad student (-6.41% to 28.16 dollars), weighed down by a net loss of 700 million dollars in the fourth quarter, well above the 80 million expected by the analysts.
The group of Santa Clara (California) suffered a further slowdown in sales in the two most important activities of the company, namely components for desktop and laptop computers, as well as those supplied to the storage centers of data (data center).
The Chevron oil tanker was penalized (-4.44% to 179.45 dollars) for its quarterly net profit significantly below expectations, impacted by asset write-downs of $ 1.1 billion.
The toymaker Hasbro (-8.11% to 58.61 dollars) paid the announcement of quarterly sales down 17%, according to preliminary data. To cope with the slowdown in sales, the group will cut 1,000 jobs, or around 15% of its workforce.
The group of hygiene and cleaning products Colgate-Palmolive fell (-5.22% to 71.59 dollars) despite results above forecasts.
The Toronto Stock Exchange
The Toronto Stock Exchange was virtually unchanged in the final session of the week, as sector gains and losses essentially balanced out, while the major US indexes advanced.
The Toronto Stock Exchange’s S&P/TSX Composite Index gained 13.98 points to end the day with 20,714.48 points.
A big market driver this year is whether central banks can rein in inflation while achieving a soft landing and so far markets seem to some extent quite optimistic about that, a observed Steve Locke, Chief Investment Officer for Fixed Income and Multi-Asset Strategies at Mackenzie Investments.
New data released Friday in the United States showed inflation continued to ease in December, while consumer spending declined, fueling growing sentiment that interest rate hikes from the Federal Reserve will soon be halted, continued Mr. Locke.
“Looking at the yield curve and valuations over the next few Fed meetings, you can see that those values that factor in the rate hikes have come down a bit. So the market again thinks the Fed might be taking a break,” he said.
In fact, expectations appear to favor lower interest rates by the fall, although Locke feels that is a bit too optimistic at this point.
Still, this rate optimism is good news for growth stocks, the analyst said, likely contributing to the NASDAQ’s outsized gains against other indexes on Friday.
“Obviously, growth stocks have had a pretty tough time relative to (stock) value in 2022, and especially for some big tech names,” he said. So there is probably a small rebound effect. »
As quarterly results continue to roll out south of the border, Locke said he expects pressure on corporate margins this year. Results will remain stable, he hopes, and they will probably not show growth in the next two quarters.
In the currency market, the Canadian dollar traded at an average rate of 75.11 cents US, up from 74.91 cents US on Thursday.
The Canadian Press