Wall Street advanced on Friday, rebounding from selloff to rally in another ping-pong session, ending a tumultuous week with investors caught between mixed corporate earnings, geopolitical turmoil and an increasingly aggressive Federal Reserve.
All three major U.S. stock indexes closed higher, with tech shares doing the heaviest lifting.
Uncertainty Roiling the Markets
"There's a lot of uncertainty out there, and that has contributed to volatility," said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. "The fundamentals of companies and the economy are still quite strong. But there’s a lot of items percolating, whether it's earnings, inflation, the Fed and geopolitical tensions."
Economic data released on Friday showed a drop in consumer spending coupled with the lowest consumer sentiment reading in a decade, and year-on-year Core PCE prices - the Federal Reserve's preferred inflation yardstick - came in at 4.9%, slightly hotter than expected.
The graphic below shows how far core PCE and other major indicators have risen above the Fed's average annual 2% target.
The Fed made it clear at the conclusion of its monetary policy meeting on Wednesday that they intend to take off their gloves and combat stubbornly persistent inflation by hiking key interest rates more aggressively than many market participants expected.
According to preliminary data, the S&P 500 gained 105.46 points, or 2.44%, to end at 4,432.02 points, while the Nasdaq Composite gained 415.04 points, or 3.11%, to 13,767.83. The Dow Jones Industrial Average rose 566.08 points, or 1.66%, to 34,726.86.
Tech Stocks the Biggest Winners
Among the 11 major sectors of the S&P 500, tech stocks enjoyed the session's biggest percentage gains.
Fourth-quarter reporting season was firing on all cylinders, with 168 of the companies in the S&P 500 having reported. Of those, 77% have delivered consensus-beating results, according to Refinitiv data.
But investors have been increasingly focused on guidance, and the extent to which companies expect ongoing global supply challenges to affect their bottom line going forward.
"As we move into 2022, and as Omicron peaks and the weather improves, I expect supply-chain pressures to ease," Mayfield added. "(They) will probably peak sometime this quarter, and ease throughout the year."
Data storage equipment maker Western Digital cited supply-chain headwinds after it reported lower than expected revenue and provided a disappointing forecast, sending its shares sliding.
Caterpillar Inc's shares dropped following the equipment maker's warning that higher production and labor costs will pressure its profit margin.
Chevron Corp fell on downbeat fourth-quarter profit.
Apple Gives the Biggest Jolt to Nasdaq, S&P
However, Apple's jump gave the S&P 500 and the Nasdaq their biggest boost, the day after the company posted record iPhone sales in the holiday quarter.
Visa Inc surged following its quarterly earnings beat driven by increased spending on international travel and e-commerce.
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