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Market Snapshot: Tech-heavy Nasdaq climbs sharply, U.S. stocks rise as investors parse inflation data ahead of Fed meeting next week

U.S. stocks were rising heading toward the closing bell Friday, with the technology-heavy Nasdaq Composite leading the way up, as investors assessed fresh data on inflation and the economy as well as companies’ fourth-quarter earnings reports.

What’s happening
  • The Dow Jones Industrial Average DJIA, +0.08% was up 165 points, or 0.5%, at almost 34,115.
  • The S&P 500 SPX, +0.25% gained nearly 29 points, or 0.7%, to 4,089.
  • The Nasdaq Composite COMP, +7.26% rose 171 points, or 1.5%, to 11,683.

For the week, the Dow is on pace to rise 2.2% while the S&P 500 is on track to advance 2.9% and the technology-heavy Nasdaq is heading for a 4.9% jump, according to FactSet data, at last check. The Nasdaq is on track for a fourth straight week of gains.

What’s driving markets

Stocks were up Friday afternoon and heading for weekly gains, as investors parsed fresh economic data including a reading from the Federal Reserve’s preferred inflation gauge showing more signs of the cost of living cooling in the U.S.

The personal-consumption-expenditures price index rose 0.1% in December for a rate of inflation of 5% over the past year, according to a report Friday from the Bureau of Economic Analysis. Inflation on a year-over-year basis slowed from 5.5% in November.

PCE and so-called core PCE were “right in line” with year-over-year estimates, said Liz Ann Sonders, chief investment strategist at Charles Schwab, by phone Friday. Both measures showed a decline from the previous month on a year-over-year, which is “good news on inflation.”

So-called core PCE, which excludes food and energy prices, rose 4.4% in the year through December, compared with a 4.7% rate in the 12 months through November. Meanwhile, consumer spending fell 0.2% last month, the report shows.

“The consumer is likely to be a weak card in the GDP deck” in the first quarter, Sonders said.

In her view, nothing from this week’s economic data “moves the needle” in terms of her continued expectations for the Fed to raise its benchmark interest rate by 25 basis points at its policy meeting next week. She expects the labor market and economy would need to weaken “pretty significantly” before the Fed starts cutting rates.

See: Fed set to deliver quarter-point rate hike along with ‘one last hawkish sting in the tail’

Still, the upshot from all the economic data released this week appears to be that the Fed is succeeding in curbing inflation without instigating a large uptick in unemployment.

This brighter outlook for the U.S. economy, combined with optimism surrounding China’s reopening, have helped to bolster global markets since the start of the year, market strategists said.

“The re-opening of China, weaker gas prices, and growing signs of a ‘soft landing’ for the U.S. economy as it appears that the Federal Reserve is reducing inflation without creating significant unemployment, are amongst the factors which have improved the outlook for global markets,” said Nigel Green, CEO of the deVere Group.

However, there are still some concerns about the strength of corporate earnings and guidance as the fourth-quarter earnings season rolls on.

“Even though in aggregate the market’s done okay” in terms of fourth-quarter results, companies that are missing Wall Street’s estimates are being punished “more than the beats are being rewarded,” Charles Schwab’s Sonders said.

Shares of Intel Corp. INTC, -6.41% were down more than 6% Friday afternoon after the chip maker reported an earnings miss.

“Intel earnings disappointed everyone,” said Edward Moya, senior market analyst for the Americas at Oanda, in a note Friday. “First quarter revenue guidance was terrible.”

U.S. stocks have seen a strong rally since the beginning of the year, with some of the most beaten-down segments of the market, including the technology sector, helping to lead the recovery.

The Nasdaq Composite is on pace for its best January since 2001, according to Dow Jones Market Data. The tech-heavy index has soared more than 11% this year, easily outperforming the S&P 500 and Dow Jones Industrial Average.

Read: QQQ is bleeding assets, but are ETF investors ‘finally bailing’ on growth stocks just as tech stocks jump in 2023?

The Invesco QQQ Trust QQQ, +1.00%, an exchange-traded fund that tracks the Nasdaq 100 index, has jumped 11.7% so far this month, according to FactSet data, at last check. The SPDR S&P 500 ETF Trust SPY, +0.23%, which recently celebrated its 30th anniversary, has risen around 6.5% in January based on Friday afternoon trading.

See: A 30-year revolution: SPY opened stocks to the masses, spawning a raft of options for today’s investors

Investors received some other economic data reports on Friday, including U.S. consumer sentiment, which improved in late January to 64.9, according to the University of Michigan’s gauge of consumer attitudes. U.S. pending-home sales rose 2.5% in December, ending a six-month losing streak.

“I’m pretty sure pending home sales doesn’t account for the possibility of cancellations,” Sonders cautioned. “It could be a false sign of hope.”

Companies in focus

—Steve Goldstein contributed to this article.

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