S&P 500 falls slightly on Friday, but heads for its second straight winning week

S&P 500 falls slightly on Friday, but heads for its second straight winning week
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Our base case is for banks to grow 50% this year, says Wells Fargo's Mike Mayo

Stocks swung on Friday as investors digested bank earnings, but the S&P 500 remained on track for its best week since November and second straight winning week as investors bet inflation would ease in 2023.

All the major indices were trading well above their session lows. The broad market S&P 500 and Nasdaq Composite fell 0.4%. The Dow Jones Industrial Average wavered above the flat line.

Stocks are still heading for a winning week, with the Nasdaq on track for its second consecutive week of gains and its best weekly performance since November. The Tech Heavy Index is up more than 3% for the week. The S&P has advanced almost 2%, while the Dow has added more than 1%.

Banking earnings weighed on stocks earlier in the day, but sentiment reversed late in the morning after investors seemed to ignore the expected negative news to a degree anyway, according to Ross Mayfield, a strategy analyst. Baird investment.

“Financials were not really expected to have a successful quarter,” he said. “It just provides a bit of a wave of sentiment, and with banks leading earnings season, they can set the tone for how investors view the bigger picture.”

Bank stocks rallied in the afternoon, after being sharply red at the start of the session.

JPMorgan Chase posted revenue that beat expectations, but the bank warned it was setting aside more money to cover loan losses because a “mild recession” is its “central case.” The bank recorded a $2.3 billion provision for credit losses in the quarter, an increase of 49% over the third quarter.

Bank of America fell slightly despite reporting better-than-expected earnings for the fourth quarter. The company echoed JPMorgan’s concerns about the economy. Is preparing for a mild recession in 2023including a scenario where unemployment rises rapidly, Chief Executive Officer Brian Moynihan said on a call with investors.

Wells Fargo was slightly higher, even after reporting last-quarter earnings had been cut in half.

“Frankly, the market has rallied quite nicely in recent weeks, without a catalyst, so there could be a little bit of profit taking from the ongoing earnings season,” Mayfield added.

On the other hand, Delta Air Lines reported earnings and revenue that beat estimates for the final quarter of 2022. However, shares fell about 4%. Investors have been waiting for these results to learn more about the health of the economy.

In economic data, the University of Michigan Consumer Confidence Survey showed the one-year inflation outlook dipped to 4%, the third consecutive monthly decline and the lowest level since April 2021.

That followed the December CPI report, released on Thursday, which showed prices fell 0.1% from November. While prices rose at a rate of 6.5% compared to a year earlier, the results raised hopes that the Federal Reserve may soon pare its hike.

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