U.S. stocks end higher, but S&P 500 logs 3rd straight weekly decline ahead of Christmas

What’s driving markets

Stocks initially traded lower after the release of a raft of economic data including the November PCE report, the Fed’s preferred barometer of inflation, as analysts said the latest batch of data likely had little impact on the Fed’s plan to continue hiking interest rates.

U.S. consumer prices increased by just 0.1% last month, less than the 0.2% increase expected by economists polled by The Wall Street Journal. Over the 12 months through November, the yearly rate of inflation slowed to 5.5%, from 6.1% in the prior month.

See: High U.S. inflation is on the wane, PCE price gauge shows

See also: Consumer spending barely rose at start of holiday shopping season

Other economic data were released, including durable-goods orders for November, which sank 2.1%. The final December reading of the University of Michigan’s consumer sentiment index ticked up slightly, but remained weak.

While investors were likely pleased to see inflation continue to slow, none of the economic data released this week would justify the Federal Reserve pivoting back toward cutting interest rates soon, said Paul Nolte, a portfolio manager at Kingsview Investment Management.

“The PCE certainly came down a little bit, but it’s nowhere near where the Fed would like it to be,” Nolte said.

Because of this, market analysts believe stocks will remain under pressure until the Fed signals that interest-rate cuts are imminent.

Weak durable goods orders and other data released this week have stoked concerns about the slowing economy as traders debate whether signs of a slowing economy might inspire the Fed to cut interest rates earlier than investors presently expect.

“While recession worries are certainly warranted, I think the market cares more about the Fed and the potential for more interest hikes. Therefore, I’m in the camp that bad economic news might be good for stocks since it should slow the Fed down,” said Joe Saluzzi, co-head of equity trading at Themis Trading.

Friday marked the start of the so-called Santa Claus rally period — the final five trading days of the calendar year and the first two trading days of the new year. The period has, on average, produced gains for stocks, but failure to do so is often read as a negative indicator.

Companies in focus

• Higher oil prices helped support shares of oil-and-gas companies, including ConocoPhillips
  COP,
  +4.32%,
  APA Corp.
  APA,
  +5.73%,
  Hess Corp.
  HES,
  +4.72%,
  Chevron Corp. 
  CVX,
  +3.09%,
  Occidental Petroleum 
  OXY,
  +3.48%
  and Exxon Mobil Corp. 
  XOM,
  +2.64%.

• Tesla Inc.
  TSLA,
  -1.76%
  shares were unable to hold on to gains seen after CEO Elon Musk said he would refrain from selling any more Tesla stock for 18 to 24 months. Musk has sold about $39 billion in stock over the past year, amid his $44 billion deal to buy Twitter. Tesla shares fell 1.8% and suffered an 18% weekly fall.

• Meta Platforms 
  META,
  +0.79%
  and users of its Facebook platform settled a privacy class action lawsuit, with Meta agreeing to pay $725 million. Meta shares rose 0.8%.