The prices of stocks witnessed a surge on Friday to close high and reverse losses as investors took in earnings results from some tech giants amid another hot print on inflation. The S&P 500 posted a weekly advance to close up 2.4%, putting an end to a three-week losing streak while the Dow and Nasdaq ended 1.65% and 3% higher respectively.
The likes of Apple (APPL) led the gainers’ list and ultimately led the way following an impressive quarterly sales report by the iPhone manufacturer. On the other hand, Robinhood (HOOD) shares was able to shake off overnight losses to trade higher after the trading platform’s miss on quarterly revenue to post a larger-than-expected quarterly decline in users.
The latest inflation data showed multi-decade high rate of price increases, with the Personal Consumption Expenditures (PCE) index posting a 5.8% year-over-year rise in December. Core PCE, which excludes more volatile food and energy prices, also increased at a 4.9% annual rate, representing the largest leap since 1983.
“The markets digested this hawkish Fed pivot that I think surprised people in terms of its magnitude,” Scott Crowe, CenterSquare Investment Management chief investment strategist, told Yahoo Finance Live on Thursday. “It wasn’t so long ago that they were describing inflation as ‘transitory,’ but now they have their sights firmly set on moderating inflation. And I think that’s given the market a lot of indigestion as it starts to digest that pretty dramatic shift.”
Jerome Powell, the Fed Reserve Chair, has also signaled a March liftoff on interest rates above the present near-zero levels was in the cards. However, there are concerns around how fast the Fed will increase interest rates and the pace of the draw down as well as tightening financial conditions.
“Everything the Fed is doing at this point we think has just been priced in over the last few weeks. And that’s where a lot of the slide in the market has come from,” Morgan Stanley Managing Director Kathy Entwistle said. “And the big question is, will we slide a little bit more? What’s happening?“
“We’re looking at companies and their earnings … to determine whether or not we’re going to have a little bit more of a pullback in the market or not,” she added. “And that’s based on what they can do going forward, where their opportunities are. And we’ve been hearing a lot about inflation. If you think about a 7% inflation rate, that’s quite significant.“
“Back in the fall, it was the retail investor that was holding up the market,” Entwistle said. “And now, their sentiments have sort of turned and they’re no longer optimistic about where we are right now. So I think we have to think about all of these things. We do think that the quality, again, is going to do better than growth.“
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