Wall Street closed the week with gains and confirmed the optimism at the beginning of the year

A file photo of the entry to the New York Stock Exchange (REUTERS / Brendan McDermid) (BRENDAN MCDERMID /)

Stocks traded higher on Wall Street on Friday as earnings season gets underway and CEOs begin to show how well or poorly they are navigating the high inflation Y a slowing economy.

Shortly before the close, the S&P 500 was up 0.4% after erasing an earlier loss. The Dow Jones Industrial Average rose 0.3 percent and the Nasdaq Composite gained 0.7 percent.

Quiet trading on Friday has the S&P 500 on track to close its best week in two months and hold a 3.9% gain year-to-date in 2023. The year has started on Wall Street with the optimism that the cooling of the trends inflationists could prompt the Federal Reserve to soften its steep interest rate hikes soon. These increases can bring inflation down, but they do so by slowing down the economy and at the risk of causing a recession. They also hurt investment prices.

The slowdown of part of the economy and the inflation still high they are weighing on corporate profits, which are one of the main levers that set share prices. Friday was the first big day that companies in the S&P 500 showed how they had done in the last three months of 2022, led by a group of banks.

JPMorgan Chase it rose 2.5% after beating analysts’ expectations for earnings and revenue. Bank of America it also shook off a morning stumble and rose 2% after posting better-than-expected results. Bank of New York Mellon It rose 2.6% after the publication of its results and the announcement of a program to buy back up to 5,000 million dollars of its shares.

Several large banks have said that a recession for the US economy, but that it will likely be mild, and that consumers remain in good health. This has raised hopes that the Federal Reserve can achieve its objective of controlling inflation without causing too much damage to the economy.

“Banks are telling the story of the broader economy and giving us a sense of where the economy is and where it may go,” said Quincy Krosby, chief global strategist at LPL Financial.

On the losing side stood Delta Airlines, which sank 3.8% after releasing forecasts that fell precipitously on Wall Street. Despite presenting better-than-expected results for the end of 2022, its profit forecast for this quarter did not meet analysts’ expectations.

The fall in shares Tesla it also weighed on Wall Street. It fell 2.1% after slashing prices on various versions of its electric vehicles. The move could increase sales, but also reduce its total revenue.

One of Wall Street’s big concerns is that S&P 500 companies will post a drop in fourth-quarter earnings from a year earlier. It would be the first such drop since 2020, when the pandemic It crushed the economy. And what is more important, the fear is that the weakness is only the beginning.

“That will suggest whether this market has to recalibrateKrosby said. “That is why the orientation of the companies next week is going to be essential.”

If the economy goes into recession, as many investors expect, 2023 is likely to see steeper declines in earnings. So CEO earnings forecasts this reporting season may be even more significant than their latest results.

Equity strategist Savita Subramanian wrote in a BofA Global Research report: “We expect earnings to take center stage going forward, where earnings reactions have been increasing” and market reactions to Inflation data and the Fed have been declining.

Subramanian expects cuts in corporate earnings estimates to accelerate in the coming months, putting pressure on stocks.

The treasury yields they went up. The 10-year Treasury yield rose to 3.50% from 3.45% on Thursday. This yield helps set interest rates on mortgages and other loans crucial to large sectors of the economy. The two-year yield, which tends to move more based on Federal Reserve expectations, rose to 4.21% from 4.15%.

A report released Friday morning showed that US consumers lowered their inflation expectations for the coming year to 4%, the lowest reading for April 2021. Long-term inflation expectations, meanwhile, remain stuck in the narrow 2.9% to 3.1% range they’ve been in for 17 of the past 18 months, according to preliminary results from the University of Michigan survey.

The Federal Reserve has proposed that these figures be kept low. Failure to do so could lead to a vicious circle that would only make inflation worse. Consumers might start to speed up their purchases in the hope of anticipating rising prices, for example, which would only push prices up.

(With information from AP)

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