In a tumultuous dance on Wall Street, stocks exhibited a rollercoaster ride on Friday, ultimately settling in mixed territory as investors grappled with a pivotal inflation report in anticipation of the Federal Reserve’s looming meeting on the future trajectory of interest rates.
After achieving a historic high on Thursday, the S&P 500 (^GSPC) flirted with the flatline but managed to secure a weekly victory. The Dow Jones Industrial Average (^DJI) edged up by approximately 0.2%, gaining 60 points, while the Nasdaq Composite (^IXIC), dominated by tech stocks, dipped close to 0.4%.
Tech behemoths faced a setback as Intel (INTC) unveiled a first-quarter outlook that significantly undershot Wall Street’s expectations, denting the artificial intelligence-fueled optimism that has propelled stocks to unprecedented heights. Intel shares plummeted nearly 12%, casting a shadow on industry peers AMD (AMD) and Nvidia (NVDA), which also experienced a slight downturn.
The release of the December PCE index provided additional evidence that inflation is continuing to ease. The “core” PCE, the Fed’s favored inflation metric, dipped below 3% on an annual basis, marking the slowest rate of growth since March 2021.
This data, coupled with a fourth-quarter US GDP estimate that surpassed expectations, contributes to the narrative that the US economy is steering towards a “soft landing.” As central bankers convene for their inaugural policy meeting of the year next week, the consensus expectation is for them to maintain interest rates at their current level. However, the recent string of positive economic indicators may nudge them towards initiating rate cuts later in the year, possibly as early as March.
The delicate balancing act confronting Fed officials stems from the juxtaposition of robust economic growth with the risk of reigniting inflationary pressures. While the latest figures underscore a resilient economy, there’s a cautious dance underway to avoid prematurely triggering an easing cycle that could potentially invite a resurgence of inflation. The week’s rollercoaster ride concludes with stocks firmly entrenched in mixed territory, reflecting the delicate balance of optimism and caution that continues to define Wall Street’s current trajectory.
Source: Yahoo Finance
