Stocks higher; S&P 500, Nasdaq notch big weekly gains

U.S. stocks ended Friday higher after key earnings reports from financial heavyweights.

The S&P 500 (^GSPC) added 0.4%, while the Dow Jones Industrial Average (^DJI) increased by 0.3%. The technology-heavy Nasdaq Composite (^IXIC) was up roughly 0.7%, closing upward for sixth consecutive day, the longest streak since 2021. The Nasdaq and S&P 500 notched their biggest weekly gains in about two months.

The yield on the benchmark 10-year U.S. Treasury ticked up slightly to 3.5%. The dollar index showed little change.

Stocks pared early losses after the University of Michigan consumer sentiment survey for January rose to a nine-month high of 64.6 from 59.7 last month. The expectations index rose to 62.0 compared to 59.9 last month.

The news provided a more optimistic outlook after a downbeat tone from America’s biggest banks, who took center stage to kick off the fourth quarter’s earnings season. Their earnings showed continued resilience in the face of economic headwinds, though many said they were taking steps to prepare for a recession in the U.S.

JPMorgan (JPM) posted better-than-expected fourth-quarter earnings, as CEO Jamie Dimon said the the U.S. economy “remains strong.” However, the bank said its central case for this year is a mild recession. JPMorgan said earnings for the three months ending in December were pegged at $11.1 billion, or $3.57 per share, up 7.2% from the same period last year.

Bank of America (BAC) reported fourth-quarter earnings that showed the bank’s revenue benefited from higher interest rates. Bank of America reported revenue of $24.5 billion in the quarter, topping estimates of $24.2 billion. That was 11% higher from the year-ago quarter.

Wells Fargo (WFC) also posted quarterly earnings that beat expectations, while revenue came in below Wall Street forecasts. The financial heavyweight reported fourth-quarter earnings of 67 cents per share on revenue of $19.7 billion, compared with year-ago earnings of $1.38 a share on revenue of $20.9 billion.

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BlackRock’s (BLK) fourth-quarter profit dropped 23%, while the bank reported net income of $1.26 billion in the same period a year earlier. Citigroup (C) posted net income of $2.5 billion, or $1.16 per diluted share, which slightly topped expectations for $2.3 billion, or $1.14 per share. However, profit fell 21%.

Finally, Goldman Sachs (GS) said its consumer lending business has lost more than $3 billion since 2020. This comes ahead of their fourth-quarter earnings scheduled to be released next week.

Bank stocks were down across the board Friday morning but moved upward later in the day. The KBW Nasdaq Bank Index (^BKX), a benchmark for the leading banks, closed the day up 0.7%.

In other stock-specific moves, shares of Tesla (TSLA) sank as much as 5% after the company cut prices for their Model 3 and Model Y vehicles. Tesla closed the day down about 1.0%.

The news appeared to drag down other automakers, including Ford (F) and General Motors (GM), which both fell more than 4.5%. Carvana (CVNA) shares sank nearly 13% as the company prepares to lay off more workers it contends with weak used-car sales, the Wall Street Journal reported on Friday.

Delta Air Lines (DAL) shares dropped 3% after the carrier forecast current-quarter profit below expectations amid higher operating costs. Space tourism startup Virgin Galactic (SPCE) shares surged 13% after the company announced that it was on track for a commercial launch in the second quarter of this year.

Finally, Amazon (AMZN) was up 3% on Friday. It gained 14% on the week for its best week since April 2020.

The moves Friday came after stocks finished higher on Thursday as investors digested optimistic inflation data that showed prices increased at a slower annual rate in December. Consumer-price inflation slowed to 6.5% in December over the prior year, cooling from 7.1% a month earlier.

Core CPI, excluding volatile food and energy components, prices climbed 5.7% year-over-year and 0.3% over the prior month. The core CPI reading came in line as expected from Bloomberg economist forecasts.

In response to the data, investors grew more confident that the Fed could ease the pace of its tightening at its next monetary policy meeting, which starts Jan. 31.

“When it comes to the Fed, the release led to growing expectations that they would downshift the pace of rate hikes again at the February meeting, moving from 50bps last time down to 25bps,” Jim Reid and colleagues at Deutsche Bank wrote in an early-morning note Friday.

Central bankers have made clear they aren’t done with interest rate increases. Fed Chair Jerome Powell stressed on Tuesday the importance of stable inflation, which could lead the central bank to take actions that are necessary, even if not popular.

Meanwhile, other Fed officials like Philadelphia Fed President Patrick Harker and Atlanta Fed President Raphael Bostic have echoed remarks that could suggest that the central bank may be open to slowing the pace of rate hikes.

Elsewhere, bitcoin rose nearly 3% to trade around $18,854.39. The cryptocurrency reached a two-month high following December inflation data on Thursday. On the corporate news front, crypto exchange Crypto.com is cutting down its global workforce by 20% as the company says its navigating ongoing economic headwinds.

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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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