Stocks managed to brush off a shaky start Friday and climb higher into the close.
Investors had plenty to consider. In addition to the latest batch of corporate earnings, a steady batch of economic data was released throughout the morning. Most notably was the personal-consumption expenditures price index, which, ahead of the Federal Reserve's policy meeting next week, showed inflation continued to cool in December.
Intel (INTC) stock plunged 6.4% today after the chipmaker said fourth-quarter earnings fell 92% year-over-year to 10 cents per share, well below the 20 cents per share analysts were expecting. Revenue fell short of consensus estimates, declining 32% year-over-year to $14.0 billion. The company also forecast lower-than-anticipated Q1 earnings and revenue. Intel CEO Pat Gelsinger cited "rising interest rates, geopolitical tensions in Europe and COVID impacts in Asia, especially in China," as well as deteriorating demand, as reasons for the weak earnings and guidance.
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On the economic front, the Commerce Department said earlier that the personal-consumption expenditures (PCE) price index – the Fed's preferred measure of inflation that tracks consumer spending – rose 5% year-over-year in December, a slower pace than the 5.5% increase seen in November. Core PCE, which excludes volatile energy and food prices, was up 4.4% on an annual basis, the lowest increase since October 2021. The data also showed that consumer spending during the key holiday month was down 0.2% from November, while personal income was up 0.3%.
"Incomes are doing just fine, but falling spending indicates that higher interest rates and inflation are taking a bite out of consumer spending," says José Torres, senior economist at Interactive Brokers. "Personal savings have increased significantly from a low level, as a strong job market and contracting spending in tandem have boosted reserves in the short-term."
While the major market indexes spent much of the early morning in negative territory, they moved higher after the release of the University of Michigan's upwardly revised consumer sentiment index for January (64.9 vs. preliminary reading of 64.6). The Nasdaq Composite ended the day up 1.0% at 11,621, the S&P 500 rose 0.3% to 4,070, and the Dow Jones Industrial Average added 0.1% to 33,978.
Fed Meeting, Tech Earnings on Tap
Next week's going to be a big one on Wall Street. For one, the Federal Reserve will hold its first policy meeting of 2023. The market is expecting the central bank to raise its benchmark interest rate by 25 basis points (0.25%).
With this outcome widely anticipated, "focus will be on any changes to the Fed's forward guidance for the path of policy," says Matthew Luzzetti, chief U.S. economist at Deutsche Bank. "The statement is likely to keep the reference to 'ongoing' rate hikes. Although the FOMC might be inclined to adjust this language as it approaches a pause, doing so at this meeting has little upside and risks widening the gap between the market and the Fed, while also leading to an undesirable easing of financial conditions."
It will also be the busiest week of fourth-quarter earnings season so far. Big Tech will be in the limelight, with Facebook parent Meta Platforms (META) and iPhone maker Apple (AAPL) among those reporting. "For all tech companies, I'm focusing on the qualitative commentary from management teams regarding spending in the second half of the year – specifically from advertising," says David Wagner, portfolio manager at Aptus Capital Advisors. "It feels as if the market is pricing in some optimism for spending in the last two quarters, so it will be important to see if management commentary is synonymous with this expectation."
Advanced Micro Devices (AMD) is also on the earnings calendar. Despite challenges facing chipmakers, AMD remains one of the best semiconductor stocks, according to analysts.
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