Wall Street rallies, snaps 3-week losing skid

All three major US indexes ended a choppy session higher. Apple’s 7 per cent gain helped erase the Nasdaq’s losses for the week.

Traders work on the floor of the New York Stock Exchange. Picture: Timothy A. Clary/ AFP.

The S&P 500 climbed on Friday night, buoyed by strong earnings from Apple, in a move that helped the broad sharemarket index snap a three-week losing streak.

The S&P closed up 2.4 per cent at 4431.85 points. The Dow Jones Industrial Average gained 565 points, or 1.65 per cent. The technology-heavy Nasdaq Composite jumped 3.2 per cent on the day, erasing all its losses for the week.

Major stock indexes have had a roller coaster week, as the Federal Reserve has rattled markets by moving toward raising interest rates. The Dow and S&P ended the volatile period with gains of 1.3 per cent and 0.8 per cent, respectively. Nasdaq was roughly flat on the week.

Some upbeat big-name corporate earnings reports cheered investors. Shares of Apple, the world’s largest publicly traded company by market capitalisation, rallied 7 per cent a day after the iPhone maker posted record revenue and profit.

“Apple was the saviour yesterday for the whole market,” said Louis Ricci, head trader of Emles Advisors, an investment-management firm.

Visa jumped 10.6 per cent on Friday after beating analysts’ forecasts for profit and sales, making it the best-performing stock in the S&P 500. Rival credit-card company MasterCard also topped forecasts, sending its shares up 9.1 per cent.

Among the day’s underperformers, Chevron slid 3.5 per cent after its fourth-quarter earnings came in lower than expected, even as surging commodity prices lifted the oil producer to its most profitable year since 2014. Caterpillar tumbled 5.2 per cent after the equipment maker reported a surge in costs that offset revenue growth.

Shares of Robinhood Markets rebounded from a 14 per cent loss after the opening bell and finished the day up about 9.6 per cent. The brokerage popular with small investors reported a larger-than-expected quarterly loss on Thursday afternoon.

Stocks have slumped since the beginning of January as the Fed has moved to raise interest rates to combat surging inflation. Fed Chairman Jerome Powell’s comments Wednesday added to expectations that the central bank will start a series of rate increases in March. Low rates during the pandemic helped fuel a huge rally in stocks and other risky assets.“Cheap money is like a comfort blanket for investors and for markets,” said Jane Foley, senior foreign-exchange strategist at Rabobank. “Almost inevitably, you start to withdraw some of that cheap money and you’re going to have more volatility in the markets.”

Government data released on Friday showed the upward pressure on prices that has worried policy makers. The Fed’s preferred measure of inflation, the core personal-consumption expenditures price index, rose at 4.9 per cent in December over the prior year.

A separate measure showed employers spent 4 per cent more on wages and benefits over the past year — an increase not seen since 2001 — as a tight labour market encouraged workers to demand higher pay. Still, employment costs didn’t rise as much in the fourth quarter as economists anticipated, easing concerns that the US economy is heading for a “wage-price spiral.” In such a scenario, salary hikes and price increases become mutually reinforcing, fuelling inflation.

Meanwhile, new Commerce Department data showed consumer spending fell last month amid rising prices and the fallout from the Omicron wave of Covid-19. Some data suggests that the highly contagious variant has peaked in densely populated parts of the US, while continuing to surge elsewhere.

Inflation concerns have filtered into this week’s corporate earnings reports. Mondelez International said late Thursday that it would likely raise prices further this year. Its shares fell 1.6 per cent on Friday after the global food giant said its profitability was being squeezed by rising ingredient and transportation costs.

Corporate earnings have generally been solid. Almost a third of the companies on the S&P 500 have reported fourth-quarter results, and 78 per cent of them have beaten analysts’ estimates for earnings per share, according to FactSet.

In commodities, US natural-gas futures shot up 8.3 per cent to settle at $US4.64 per million British thermal units as a snowstorm threatened to hit the East Coast and forecasters said February would be colder than anticipated, driving up expected demand for the heating fuel.

Investors bought government bonds on Friday, pushing down yields. The yield on the 10-year Treasury note dropped to 1.779 per cent from 1.807 per cent on Thursday. Bond yields move in the opposite direction from prices.

European markets dropped, with the pan-continental Stoxx Europe 600 falling 1 per cent.

The Wall Street Journal