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

Wells Fargo's Mike Mayo says our base case is for banks to be up 50% this year

Shares jumped on Friday as investors digested bank earnings, but the S&P 500 remained on track for its best week since November and won a second week in a row as investors bet inflation will ease in 2023 .

All the major indices of the session are trading at their lower levels. The broader markets S&P 500 and Nasdaq Composite fell 0.4% each. The Dow Jones Industrial Average wobbled on a flat line.

Stocks are still headed for a winning week, with the Nasdaq on pace for its second week in a row and its best weekly performance since November. The tech-heavy index is up more than 3% for the week. The S&P is up nearly 2%, while the Dow has 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 shrugged off the negative news, according to investment strategy analyst Ross Mayfield at Baird.

“The financials were not really expected to be a blockbuster quarter,” he said. “It’s just providing a sentiment wave, and as banks head into earnings season, they could set the tone for how investors view the broader picture.”

Bank stocks were higher in the afternoon, after being clearly in the red at the start of the session.

“Frankly, the market has had a nice run up over the past few weeks, no catalysts, and so there could be a little profit taking going into earnings season,” Mayfield said.

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Wells Fargo, whose profit fell by more than half last quarter, said it was preparing for the economy to be “worse than the last few quarters.”

JPMorgan Chase posted revenue that beat expectations, but still, the bank warned of setting aside more money to cover credit losses because a “mild recession” is its “central issue.” The bank made provisions for loan losses of $2.3 billion in the quarter, up 49% from the third quarter.

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

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Elsewhere, Delta Air Lines reported earnings and revenue for the final quarter of 2022 that beat estimates. However, the stock fell nearly 4%. Investors are looking forward to these results to get more information about the health of the economy.

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

That followed the December CPI report, released on Thursday, that showed prices declined 0.1% from November. While prices rose at a 6.5% pace over the past year, the results raised hopes that the Federal Reserve may soon slow down on its hiking trail.


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