Stocks bounced around Friday before landing in mixed territory as investors digested a key inflation reading ahead of next week’s Fed meeting on the future of interest rates.
After setting a new record on Thursday, the S&P 500 (^GSPC) fell just below the flatline but notched a win for the week. The Dow Jones Industrial Average (^DJI) increased about 0.2% or 60 points, while the tech-heavy Nasdaq Composite (^IXIC) slid close to 0.4%
Tech lagged behind the other indexes after Intel’s (INTC) first-quarter outlook fell well short of Wall Street expectations, somewhat denting the AI-fueled hopes that have helped lift stocks to record highs. Intel shares fell nearly 12%, with peers AMD (AMD) and Nvidia (NVDA) also taking a slight knock.
The release of the PCE index for December offered more evidence that inflation continues to moderate. “Core” PCE, the inflation gauge commonly known as the Fed’s preferred measure, fell below 3% on an annual basis, the slowest rate of growth since March 2021.
That number, combined with a hotter-than-expected early estimate on fourth quarter US GDP, could further the notion that the US economy is headed for a “soft landing.”
Central bankers will huddle next week for their first policy meeting of the year. They are widely expected to keep interest rates steady. But the latest string of positive economic data will likely prompt them to begin cutting rates later this year, perhaps as early as March. The fresh figures showing robust economic growth create a delicate balancing act for Fed officials as kicking off an easing cycle too early may invite inflation to ramp back up.
At the same time, investors parsed Friday’s batch of earnings for more insight into the health of corporate America and the economy. Colgate-Palmolive (CL) was a highlight, posting strong fourth-quarter results attributed to its Latin American consumer markets. Visa (V) gave a tepid revenue-growth forecast with some analysts pointing to a slowdown in US payments volume growth that faded heading into the new year, which could indicate an economic slowdown ahead.
