S&P 500 falls slightly on Friday, but heads for its second winning week in a row

Our base case is for banks to rise 50% this year, says Wells Fargo's Mike Mayo

Stocks fell on Friday as investors digested bank earnings, but the S&P 500 remained on track for its best week since November and a second straight weekly gain as investors is betting on inflation to ease in 2023.

All major indexes traded well off their session lows. The broad market S&P 500 and the Nasdaq Composite fell 0.4%. The Dow Jones Industrial Average is in doubt on the flat line.

Stocks are still headed for a winning week, with the Nasdaq up for the second week in a row and its best weekly performance since November. The tech-heavy index rose more than 3% for the week. The S&P rose nearly 2%, while the Dow added more than 1%.

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Bank earnings weighed on equities to start the day, but sentiment reversed late in the morning after investors appeared to reject the negative news expected to some degree, according to Ross Mayfield. , investment strategy analyst at Baird.

“Financials never expected to have a blockbuster quarter,” he said. “It just provides a small sentiment wave, and because banks are leading earnings season they can set the tone for how investors view the broader picture.”

Bank stocks were higher in the afternoon, after turning bright red at the start of the session.

“Frankly, the market has rallied well in the last few weeks, there hasn’t been a catalyst, and so there may be a little profit taking from the earnings period going forward,” Mayfield added.

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Wells Fargo, whose earnings for the last quarter were cut in half, said it was preparing for an economy that was “worse than in previous quarters.”

JPMorgan Chase posted earnings that beat expectations, but even so, the bank warned that it was setting aside more money to cover credit losses because a “mild recession” was the “central case .” The bank posted a $2.3 billion provision for credit losses in the quarter, a 49% increase from the third quarter.

The CEOs of Citigroup and Bank of America also said they expect a “mild recession.”

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Elsewhere, Delta Air Lines reported earnings and profits that beat estimates for the final quarter of 2022. However, the stock fell about 4%. Investors are waiting for these results to get more insight into the health of the economy.

In economic data, the University of Michigan consumer sentiment survey showed a one-year inflation outlook to 4%, the third consecutive monthly decline and the lowest level since April 2021.

That followed the December CPI report, released Thursday, which showed prices fell 0.1% in November. While prices rose at a 6.5% pace compared to last year, the results raised hopes that the Federal Reserve will soon slow its pace.


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