Investors are not happy with a recent selloff in U.S. stocks, but their pain is unlikely to last long-term as the bull market continues its slow and steady march forward.
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Stocks wavered on Friday, with the Dow Jones Industrial Average and the S&P 500 on track for their fourth straight weekly loss, as investors parsed earnings from Chevron, CVX -4.35% Caterpillar and other big-name companies.
The Dow was down 87 points, or 0.3%, in late-morning trading. The S&P 500 ticked up 0.2%. The technology-heavy Nasdaq Composite gained 0.6%.
Chevron fell 4.7 percent after posting lower-than-expected fourth-quarter results, despite increasing commodity prices propelling the oil major to its most lucrative year since 2014. Caterpillar’s stock dropped 5.7 percent after the company announced a rise in expenses that outweighed an increase in income.
Robinhood Markets’ stock has recovered from a severe fall of more than 10% after the opening bell, and is now up approximately 2%. On Thursday afternoon, the small-investor-friendly brokerage disclosed a larger-than-expected quarterly loss.
Apple was one of the day’s biggest gainers, up 4.3 percent as the tech behemoth reported record sales and earnings. Visa rose 6.3 percent after exceeding analysts’ earnings and sales projections.
Amateur investors swooped in on meme stocks like GameStop and AMC Entertainment a year ago, taking the stock market by storm. Many people remember it as a revolution against Wall Street, but in reality, it mostly served to enrich the wallets of big financial institutions. Dion Rabouin of the Wall Street Journal explains. Sebastian Vega’s illustration
Since the beginning of January, stocks have been falling as the Federal Reserve has pushed to raise interest rates in order to battle rising inflation. Fed Chairman Jerome Powell’s remarks on Wednesday fueled speculation that the central bank will begin raising rates in March. During the epidemic, low interest rates aided a massive surge in equities and other risky assets.
“For investors and markets, cheap money is like a comfort blanket,” said Jane Foley, senior foreign-exchange strategist at Rabobank. “Almost surely, you’ll start withdrawing some of that cheap money, and the markets will become more volatile.”
New government statistics published on Friday revealed the increased pricing pressure that has policymakers concerned. The core personal-consumption expenditures price index, the Fed’s preferred gauge of inflation, increased by 4.9 percent in December over the previous year. Employers spent 4% more on salaries and benefits last year than they had in 2001, according to a different measure, as a tight labor market drove employees to demand higher compensation.
Meanwhile, fresh Commerce Department data shows that consumer spending declined last month as a result of increasing costs and the aftermath of Covid-19’s Omicron wave.
Despite strong results, the stock market has remained turbulent.
Associated Press photo by Allie Joseph
Concerns about inflation have crept into this week’s business earnings announcements. Late Thursday, Mondelez International said that it will likely boost prices again this year. Its stock dropped almost 3% on Friday as the global food giant reported rising ingredient and shipping costs were squeezing profits.
Jitters over the Fed and inflation have preoccupied investors even as corporate earnings have generally been solid. Almost a third of the companies on the S&P 500 have reported fourth-quarter results, and 78% of them have beaten analysts’ estimates for earnings per share, according to FactSet.
On Friday, investors purchased government bonds, lowering rates. The yield on the 10-year Treasury note fell to 1.789 percent on Friday, down from 1.807 percent the day before. Bond yields are inversely proportional to bond prices.
—This article was co-written by Alexander Osipovich.
Joe Wallace can be reached at [email protected]
Corrections & Amplifications Government-bond prices fell, pushing up yields. An earlier version of this article incorrectly said falling bond prices pushed up prices. (Corrected on Jan. 28.)
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