Wall Street closes higher with weekly gains as Fed’s decision eyed

US equities advanced on Friday, marking the end of trading week that was full of key economic data as well as earnings results signaling weakening demand but also economic flexibility with only a few days apart from Fed’s policy decision next week.

All three major US stock indexes ended Friday’s US session in the green territory, with the Nasdaq, powered by MEGACAP momentum stocks, recording the biggest gain. From last Friday’s close, the S&P and the Dow posted their third weekly gains in four, while the tech-laden Nasdaq notched its fourth straight weekly advance.

So far in the early weeks of 2023, the Nasdaq has jumped 11%, while the S&P 500 and the Dow have gained 6% and 2.5%, respectively. So, this was another week with solid equity performance to mark a historically strong month.

Inflation continues to come down quickly and therefore, it is a fact that easing a lot of concerns and woes regarding state of the economy.

The Commerce Department’s hotly anticipated PCE report came in line with consensus, showing softening demand and cooling inflation. This is exactly what the Fed’s restrictive interest rate hikes meant in essence. The data is another building block to the inflation data markets have been seeing recently.

Supply chains continue to open up and improve, opening the door for the Fed to end its aggressive rate hiking cycle. Fed Chair Jerome Powell clearly stated that the policymakers’ battle against decades-high inflation is far from over. Financial markets still believe the central bank will hike the Fed funds target rate by another 25 basis points next week.

Q4 earnings season is running at full speed, with 143 companies in the S&P 500 having reported their results. 67.8% have beaten expectations, slightly better than the 66% long-term average, but below the 76% beat rate over the past four quarters.

Analysts now see aggregate S&P 500 earnings falling 2.9% year-on-year, compared with the milder 1.6% annual drop seen on January 1. The Dow Jones Industrial Average rose 28.67 points, or 0.08%, to 33,978.08, the S&P 500 gained 10.13 points, or 0.25%, to 4,070.56 and the Nasdaq Composite added 109.30 points, or 0.95%, to 11,621.71.

Among the 11 major sectors of the S&P 500, consumer discretionary led the percentage gainers, while energy (.SPNY) suffered the largest percentage loss, down 2%. Shares of Intel Corp fell by 6.4% after the chipmaker provided dismal earnings projections.

Chevron Corp posted record 2022 profit, but its fourth quarter earnings fell short of expectations, dragging the stock down 4.4%. Rival payment companies American Express Co and Visa Inc reported consensus-beating results, easing worries of waning consumer demand. There shares jumped 10.5% and 3.0%, respectively.

Next week, in addition to the Fed meeting and January employment data, other earnings reports are awaited including Apple, Amazon, Alphabet and Meta Platforms.