Stocks teetered on Friday as investors digested bank gains, but the S&P 500 remained on track for its best week since November and a second consecutive winning week, with investors betting that inflation would ease in 2023.
All major indices were trading well from their session lows. The broad market S&P 500 and Nasdaq Composite were down 0.4%. The Dow Jones Industrial Average has hovered over the flat line.
Stocks are still on track for a winning week, with the Nasdaq on track for its second straight week of gains and its best weekly performance since November. The tech-heavy index rose more than 3% for the week. The S&P advanced nearly 2%, while the Dow rose more than 1%.
Bank gains weighed on equities earlier in the day, but sentiment reversed by late morning after investors appeared to ignore negative news that was expected anyway, according to Ross Mayfield, an investment strategy analyst. from Baird.
“The financial sector was not expected to have a blockbuster quarter,” he said. “It’s just a wave of sentiment, and as banks lead the earnings season, they could set the tone for how investors view the bigger picture.”
Bank stocks rose in the afternoon after turning markedly red earlier in the session.
“Frankly, the market has recovered very well in recent weeks without a catalyst, and there may only be a little bit of profit in the earnings season,” Mayfield added.
Wells Fargo, whose last quarter earnings was cut in halfsaid he is bracing for the economy “to be worse than it has been in recent quarters”.
JPMorgan Chase reported revenue that beat expectations, but even so, the bank warned it was setting aside more money to cover credit losses because a “mild recession” is its “core case”. The bank recorded a $2.3 billion provision for credit losses in the quarter, up 49% from the third quarter.
The CEOs of Citigroup and Bank of America also said they are predicting a “mild recession”.
Elsewhere, Delta Air Lines reported earnings and revenue that beat estimates for the final quarter of 2022. However, shares were down about 4%. Investors are waiting for these results to get more information about the health of the economy.
In economic data, the University of Michigan Consumer Sentiment Survey showed that the one-year inflation outlook has dropped to 4%, the third consecutive monthly decline and the lowest level since April 2021.
This followed the December CPI report released on Thursday which showed prices were down 0.1% from November. While prices rose at a 6.5% year-on-year pace, the results raised hopes that the Federal Reserve may soon slow its rise.