Wall Street closed higher on Friday continuing the northbound movements of U.S. stocks in January. A series of favorable economic data, especially a key inflation data, boosted market participants’ sentiment. All three major indexes ended in green. For the week as a whole, these indexes also finished in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.1% to close at 33,978.08. Notably, 13 components of the 30-stock index ended in positive territory, 16 in negative zone and one remained unchanged. The blue-chip index recorded a six-day winning streak, its longest since October 2022.
The tech-heavy Nasdaq Composite finished at 11,621.71, gaining 0.9% or 109.03 points due to strong performance of large-cap technology stocks. The tech-laden index posted back-to-back winning days.
The major gainer of the Nasdaq Composite was Lucid Group Inc. (LCID – Free Report) as its stock price soared 43%. Lucid Group carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 was up 0.2% to end at 4,070.56. Seven out of 11 broad sectors of the benchmark index closed in positive territory while the remaining four in negative zone. The Consumer Discretionary Select Sector SPDR (XLY) advanced 2,3% while the Energy Select Sector SPDR (XLE) tumbled 2%.
The fear-gauge CBOE Volatility Index (VIX) was down 1.2% to 18.51. A total of 11.88 billion shares were traded on Friday, higher than the last 20-session average of 11.10 billion. Advancers outnumbered decliners on the NYSE by a 1.40-to-1 ratio. On Nasdaq, a 1.34-to-1 ratio favored advancing issues.
Inflation is Dwindling
The Department of Commerce reported that the personal consumption expenditure (PCE) price index (PCE Inflation) rose 0.1% in December, in line with the consensus estimate. In November also, the PCE inflation rose by 0.1%. Year over year, PCE inflation increased 5% in December, marking its lowest annual rate in a month since September 2021. Year over year, PCE inflation rose 5.5% in November.
The core PCE inflation (excluding volatile food and energy items) – the Fed’s favorite inflation gauge – rose 0.3% in December in line with the consensus estimate. In November, the core PCE inflation rose by 0.2%. Year over year, core PCE inflation increased 4.4% in December, marking its lowest annual rate in a month since October 2021. Year over year, core PCE inflation rose 4.7% in November.
Consumer spending – that constitutes more than 65% of the U.S. GDP – dropped 02% in December, compared with the consensus estimate of a decline of 0.1%. In November, consumer spending rose by 0.1%. The real consumer spending (after adjusting inflation rate) fell 0.3% in December.
Personal income rose 0.2% in December, in line with the consensus estimate. However, November’s data was revised downward to 0.3% from 0.4% reported earlier. Personal savings rate came in at 3.4% in December. November’s data was revised upward to 2.9% from 2.4% reported earlier.
Other Economic Data
The National Association of Realtors reported that the Pending Home Sales Index for December rose 2.5% to 76.9, marking its first monthly improvement since May 2022.
The University of Michigan reported that the final Consumer Sentiment Index for January rose to 64.9 compared with the consensus estimate of 64.4. The preliminary data for January was 64.6 and the final reading of December was 59.7.
The final reading of the current conditions sub-index rose to 68.4 in January from 59.4 in December. The sub-index for expectations for the next six months rose 62.7 in January from 5.9 in December. Expectations of Americans with respect to the inflation rate for next 12-months fell to 3.9% in January from 4.4% in December. However, the expectation for inflation rate for long-term (5 years) remained steady at 2.9%.
Last week was an impressive one for Wall Street. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – gained 1.8%, 2.5% and 4.3%, respectively. The Nasdaq Composite has recorded wins for four consecutive weeks.
Declining inflation rate since November, a resilient labor market, growing possibility of a soft landing of the U.S. economy by the Fed and reopening of China lifted investors’ confidence in risky assets like equities.