After an early move to the upside, stocks fluctuated over the course of the trading session on Friday before eventually ending the session narrowly mixed. The Nasdaq and the S&P 500 closed modestly higher, while the narrower Dow edged slightly lower.
While the Dow slipped 18.38 points or 0.1 percent to 37,385.97, the Nasdaq rose 29.11 points or 0.2 percent to 14,992.97 and the S&P 500 crept up 7.88 points or 0.2 percent to 4,754.63.
Despite the mixed performance on the day, the major averages all moved higher for the week. The Nasdaq jumped by 1.2 percent, the S&P 500 advanced by 0.8 percent and the Dow edged up by 0.2 percent.
Stocks initially benefited from the release of tamer-than-expected U.S. inflation data, but other upbeat economic data led to some uncertainty about the outlook for interest rates.
The Commerce Department released a highly anticipated report showing the annual rate of consumer price growth decelerated to 2.6 percent in November from a downwardly revised 2.9 percent in October.
Economists had expected the pace of price growth to slow to 2.8 percent from the 3.0 percent originally reported for the previous month.
The annual rate of growth by core consumer prices, which exclude food and energy prices, also slowed to 3.2 percent in November from a downwardly revised 3.4 percent in October.
Economists had expected core consumer price growth to decelerate to 3.3 percent from the 3.5 percent originally reported for the previous month.
The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending.
The bigger than expected slowdown in consumer price growth added to optimism the Fed is poised to pivot to cutting interest rates early next year.
Meanwhile, the Commerce Department released a separate report showing new orders for U.S. manufactured durable goods surged by much more than expected in the month of November.
The report said durable goods orders spiked by 5.4 percent in November after tumbling by a revised 5.1 percent in October.
Economists had expected durable goods orders to jump by 2.2 percent compared to the 5.4 percent nosedive that had been reported for the previous month.
Excluding a rebound in orders for transportation equipment, durable goods orders climbed by 0.5 percent in November after falling by 0.3 percent in October. Ex-transportation orders were expected to inch up by 0.1 percent.
Alex McGrath, Chief Investment Officer for NorthEnd Private Wealth, noted core consumer price growth is still well above the Fed’s target of 2.0 percent, which he said is “less supportive of the imminent cuts the market is expecting.”
“This especially comes into focus looking at the durable goods orders that came in wildly above expectations,” McGrath said. “The idea that to drive inflation down the economy needs to slow has once again put the Fed in between a rock and a hard place.”
He added, “If the economy never slows down enough to fully stamp inflation out and they begin cutting, do we see an Arthur Burns 2.0 moment where the battle with inflation rears its head again in 2024? That will undoubtedly be one of the more pressing questions facing investors next year.”
A steep drop by shares of Nike (NKE) weighed on the Dow, with the athletic apparel and footwear giant plunging by 11.8 percent after the company lowered its revenue outlook and unveiled plans to cut $2 billion in costs over the next three years.
Sector News
Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broad markets.
Biotechnology stocks showed a significant move to the upside, however, with the NYSE Arca Biotechnology Index jumping by 2.0 percent to a five-month closing high.
Notable strength was also visible among airline stocks, as reflected by the 1.0 percent gain posted by the NYSE Arca Airline Index.
Other Markets
In overseas trading, stocks across the Asia-Pacific region turned in a lackluster performance during trading on Friday. Japan’s Nikkei 225 Index inched up by 0.1 percent, while China’s Shanghai Composite Index edged down by 0.1 percent.
The major European markets also ended the day little changed. While the French CAC 40 Index closed marginally lower, the U.K.’s FTSE 100 Index closed just above the unchanged line and the German DAX Index inched up by 0.1 percent.
In the bond market, treasuries closed roughly flat after pulling back off their early highs. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, crept up by less than a basis point to 3.901 percent.
Looking Ahead
Next week’s trading activity may be somewhat subdued following the Christmas weekend, with a relatively light U.S. economic calendar also likely to keep some traders on the sidelines.
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