Wall Street adds more to its big January after strong week

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NEW YORK — A strong week for Wall Street closed out with modest gains Friday, sending the stock market to its highest level since early December.

The S&P 500 rose 0.2% to clinch its third winning week in the last four and was near its highest level since the summer, before fading at the end of the day. It’s rallied through January on growing belief inflation is on a steady downswing, hopefully leading to less pressure on the economy and markets.

The Dow Jones Industrial Average rose 28 points, or 0.1%, while the Nasdaq composite gained 0.9%.

Helping to lead the way was American Express, which jumped 10.5% despite reporting weaker profit and revenue for the latest quarter than expected. It gave a forecast for earnings through 2023 that topped Wall Street’s expectations and announced a planned increase to its dividend.

Another big gain for Tesla’s stock also supported the market. It rose 11% following its stronger-than-expected profit report for the end of 2022 released earlier in the week.

They helped offset a 6.4% loss for Intel following a jarring warning from the chipmaker. Not only did its revenue and earnings fall short of expectations last quarter, it also gave a forecast for revenue this quarter more than $2 billion below analysts’ expectations.

All told, the S&P 500 rose 10.13 points to 4,070.56. The Dow climbed 28.67 to 33,978.08, and the Nasdaq gained 109.30 to 11,621.71.

Hasbro fell 8.1% after saying it “underperformed” in this past holiday shopping season and will likely report a 17% drop in revenue for the fourth quarter. The company will cut about 1,000 jobs to reduce costs.

So far, the job market has remained remarkably resilient despite a slowing overall economy. Almost all of the high-profile layoff announcements have been within the tech industry, which raced to expand after the pandemic sent demand for technology soaring.

Earnings reporting season is entering its heart, and companies have been offering mixed results and forecasts. That’s helped lead to some big swings in markets.

Two competing big ideas have been sending Wall Street veering recently. On one hand are worries about a steep drop-off in profits and a severe recession for the economy following all the Federal Reserve’s increases to interest rates last year meant to crush inflation. On the other are hopes that cooling inflation may allow the Fed to take it easier on rates.

The market is partly trying to reconcile that weak earnings and a drop in demand may be necessary for inflation to keep cooling, said Keith Buchanan, portfolio manager at Globalt Investments.

“It’s kind of like this is the medicine the economy has to take,” he said.

Economic reports on Friday backed up recent data points suggesting inflation continues to moderate. The measure the Fed prefers, which doesn’t count food and energy costs, was 4.4% higher in December than a year earlier. That was down from 4.7% inflation in November.

Reports also showed that income growth for Americans slowed in December, while consumer spending fell off a bit more sharply than expected.

A separate report said U.S. consumers are also downshifting their expectations for inflation in the coming year. Over the long run, the University of Michigan said inflation expectations remain roughly where they’ve been for most of the last 18 months.

Economists said Friday’s data likely keeps the Fed on track to raise its key benchmark rate by 0.25 percentage points at its meeting next week. That would be a step down from its increase of 0.50 points last month and four straight hikes of 0.75 points before that.

Smaller increases would mean less added pressure on the economy, which has already seen damage done to the housing industry and other areas because of last year’s surge in rates.