Stocks surged into the close reversing earlier losses on Friday as investors took in earnings results from some major tech companies and another hot print on inflation at the end of another volatile week.
The S&P 500 closed up 2.4%, posting a weekly advance and ending a three-week losing streak. The the Dow ended higher by 1.65%, and Nasdaq gained 3%.
Technology stocks led the way higher as Apple (AAPL) jumped after the iPhone-maker reported record quarterly sales and better-than-expected profits despite supply chain challenges. Meanwhile, Robinhood (HOOD) shares shook off overnight losses to trade higher after the trading platform missed on quarterly revenue, posted a larger-than-expected quarterly decline in users, and offered disappointing guidance.
Fresh economic data was also in focus on Friday. The latest inflation data showed another multi-decade high rate of price increases, as the Personal Consumption Expenditures (PCE) index posted a 5.8% year-over-year rise in December, or the biggest jump since 1982. Core PCE, which excludes more volatile food and energy prices, rose at a 4.9% annual rate, representing the largest leap since 1983.
The S&P 500 was on track to post a weekly loss of about 1.3%, based on Thursday's closing prices. New reports showing a better-than-expected rise in fourth-quarter U.S. GDP and improvement in weekly jobless claims did little to help turn stocks around on Thursday. The Dow and Nasdaq have each also fallen over the course of the past week, with volatility rising as traders considered the implications of the Federal Reserve's more hawkish monetary policy tilt for markets.
"The markets digested this hawkish Fed pivot that I think surprised people in terms of its magnitude," Scott Crowe, CenterSquare Investment Management chief investment strategist, told Yahoo Finance Live on Thursday. "It wasn't so long ago that they were describing inflation as 'transitory,' but now they have their sights firmly set on moderating inflation. And I think that's given the market a lot of indigestion as it starts to digest that pretty dramatic shift."
Federal Reserve Chair Jerome Powell strongly signaled earlier this week that a March liftoff on interest rates to above their present near-zero levels was in the cards. However, other questions remained — namely around just how quickly the Fed will raise interest rates, and around when and how rapidly the Fed will begin drawing down its nearly $9 trillion balance sheet and tightening financial conditions.
"Everything the Fed is doing at this point we think has just been priced in over the last few weeks. And that's where a lot of the slide in the market has come from," Morgan Stanley Managing Director Kathy Entwistle told Yahoo Finance Live on Thursday. "And the big question is, will we slide a little bit more? What's happening?"
"We're looking at companies and their earnings ... to determine whether or not we're going to have a little bit more of a pullback in the market or not," she added. "And that's based on what they can do going forward, where their opportunities are. And we've been hearing a lot about inflation. If you think about a 7% inflation rate, that's quite significant."
"Back in the fall, it was the retail investor that was holding up the market," Entwistle said. "And now, their sentiments have sort of turned and they're no longer optimistic about where we are right now. So I think we have to think about all of these things. We do think that the quality, again, is going to do better than growth."
4:57 p.m. ET: Apple posts biggest jump since July 2020 after earnings
Apple's record fourth-quarter sales and profits helped catalyze the stock's biggest jump in a year-and-a-half.
Shares soared by nearly 7% on Friday alone, helping to reverse earlier losses after a technology stock rout throughout January. Apple shares were still down 4% for the month-to-date through Friday's close. However, the stock still outperformed the S&P 500, which has fallen by 7% so far in January.
4:01 p.m. ET: Stock gains accelerate into the close
Here were the main moves in markets as of 4:01 p.m. ET:
S&P 500 (^GSPC): +105.49 (+2.44%) to 4,432.00
Dow (^DJI): +565.42 (+1.66%) to 34,726.20
Nasdaq (^IXIC): +417.79 (+3.13%) to 13,770.57
Crude (CL=F): +$0.55 (+0.64%) to $87.16 a barrel
Gold (GC=F): -$5.90 (-0.33%) to $1,789.10 per ounce
10-year Treasury (^TNX): -2.5 bps to yield 1.7820%
12:35 p.m. ET: Robinhood shares recover after reporting disappointing quarterly results, but stock has still fallen nearly 70% since IPO
Robinhood, the digital trading platform popular with retail investors, has seen shares slide by about 67.5% since its initial public offering in July 2021. This has landed the stock among the worst-performing IPOs during the pandemic period, alongside others including the Chinese ride-hailing giant Didi Global (DIDI), according to Bloomberg data.
Though the stock recovered some losses during intraday trading on Friday, shares had sunk by more than 10% during the overnight session, after the company posted disappointing quarterly results. Net revenue came in at $362.7 million, coming in well below the $370.9 million expected. And monthly active users posted a larger-than-expected quarter-over-quarter decline, dropping by 8.5% to reach 17.3 million. Consensus analysts were looking for 19.9 million monthly users.
12:28 p.m. ET: Stocks extend gains, Nasdaq adds 1.6%
Here's where markets were trading during he afternoon session:
S&P 500 (^GSPC): +42.28 (+0.98%) to 4,368.79
Dow (^DJI): +101.21 (+0.3%) to 34,261.99
Nasdaq (^IXIC): +213.90 (+1.61%) to 13,567.71
Crude (CL=F): +$0.95 (+1.1%) to $87.56 a barrel
Gold (GC=F): -$12.20 (-0.68%) to $1,782.80 per ounce
10-year Treasury (^TNX): -2.4 bps to yield 1.784%
10:45 a.m. ET: 'We're still talking about closer to four rate hikes priced in for 2022': Strategist
In a new note, Bank of America economists said that they are expecting the Fed to raise interest rates by 25 basis points seven times this year, representing one of the most hawkish predictions so far for the path forward for the central bank.
According to DailyFX.com senior strategist Christopher Vecchio, however, this will ultimately not likely be the path the Fed actually adopts. Still, the highly hawkish prediction highlights just how much more aggressive many market participants are now expecting the Fed to be.
"I do think that some investors will take this and see it as a sign that the tides have turned quite dramatically, with respect to expectations around Fed policy," Vecchio said when asked about Bank of America's outlook on interest rates. "The market itself, when you look at a variety of measures — if you're looking at eurodollar futures contracts, if you're looking at Fed funds futures — we're still talking about closer to four rate hikes priced in for 2022."
"So the fact of the matter is, that there is this disconnect between what some banks are saying, and banks talk in their book in part because net interest margin increasing would be beneficial for their bottom line," he added. "There is a disconnect between what banks are predicting and what the market itself is actually predicting."
"Historically speaking, the market's been pretty rubbish about predicting which way the Fed is going to go," Vecchio noted. "Always too aggressive or too dovish — it's never in that Goldilocks zone where it ends up nailing the actual path of interest rate hikes. So I would suggest that as the data evolves, as we move forward through this year, the sensitivity to inflation, and more importantly, to those supply chain issues will largely dictate how fast the Fed moves."
10:03 a.m. ET: Consumer sentiment fell to lowest since 2011 in late January: University of Michigan
A closely watched index of consumer sentiment slipped at the end of January to reach the lowest level in a decade, signaling consumers were increasingly concerned over rising prices, the ongoing pandemic and emerging geopolitical risks.
The University of Michigan's final January consumer sentiment index fell to 67.2, dipping from the preliminary estimate of 68.8 earlier in the month. This represented the lowest reading since November 2011. Subindices tracking both consumers' expectations for future conditions and assessments of present economic conditions each deteriorated during the month.
"Overall confidence in government economic policies is at its lowest level since 2014, and the major geopolitical risks may add to the pandemic active confrontations with other countries," Richard Curtin, chief economist for the University of Michigan's Surveys of Consumers, wrote in a press statement.
"Although their primary concern is rising inflation and falling real incomes, consumers may misinterpret the Fed's policy moves to slow the economy as part of the problem rather than part of the solution," he added. "The danger is that consumers may overreact to these tiny nudges, especially given the uncertainties about the coronavirus and other heightened geopolitical risks."
9:30 a.m. ET: Stocks open mixed after hot inflation print, earnings
Here's where stocks were trading Friday morning just after the opening bell:
S&P 500 (^GSPC): +10.47 (+0.24%) to 4,336.98
Dow (^DJI): +20.60 (+0.06%) to 34,181.38
Nasdaq (^IXIC): +57.26 (+0.43%) to 13,411.39
Crude (CL=F): +$1.69 (+1.95%) to $88.30 a barrel
Gold (GC=F): -$11.60 (-0.65%) to $1,783.40 per ounce
10-year Treasury (^TNX): +1.7 bps to yield 1.827%
8:37 a.m. ET: Personal income posts disappointing rise in December as spending dips
U.S. personal income rose at a lackluster pace in December, logging the smallest gain since September as pandemic-era government assistance programs waned.
Personal income rose at a 0.3% month-on-month rate in December, the Bureau of Economic Analysis said Friday, missing estimates for a 0.5% rise, according to Bloomberg consensus data. Income had risen 0.5% in November.
Personal spending fell 0.6% during the month, matching consensus estimates. This came marked the first drop since February 2021, and came following a 0.4% rise in. spending in November.
8:30 a.m. ET: Personal Consumption Expenditures jump 5.8% in December, marking fastest rise since 1982
A key measure of inflation rose at a fresh four-decade high in December, underscoring lingering inflationary pressures in the economy.
The Personal Consumption Expenditures (PCE) index rose 5.8% in December compared to the same month last year, the Bureau of Economic Analysis said Friday. This accelerated from November's 5.7% year-over-year. gain. The print for the final month of 2021 matched consensus estimates, based on Bloomberg data. Month-over-month, PCE rose 0.4% in December, also matching estimates and slowing from November's 0.6% gain.
Excluding food and energy prices, however, the core PCE rose slightly more than expected, logging a 4.9% year-over-year rise versus the 4.8% increase consensus economists had anticipated. This also sped up from November's 4.7% rise in core PCE. Core PCE serves as the Federal Reserve's preferred indicator of underlying price trends.
7:16 a.m. ET Friday: Stock futures trade mixed, Apple holds onto overnight gains
Here's where stocks were trading before the opening bell Friday morning:
S&P 500 futures (ES=F): -14 points (-0.32%), to 4,303.75
Dow futures (YM=F): -144.00 points (-0.42%), to 33,899.00
Nasdaq futures (NQ=F): +5.75 points (+0.04%) to 13,992.50
Crude (CL=F): +$0.72 (+0.83%) to $87.33 a barrel
Gold (GC=F): -$8.30 (-0.46%) to $1,786.70 per ounce
10-year Treasury (^TNX): +3.8 bps to yield 1.846%
6:15 p.m. ET Thursday: Stock futures jump after Apple earnings
Here's where futures began trading Thursday evening:
S&P 500 futures (ES=F): +30 points (+0.69%), to 4,347.75
Dow futures (YM=F): +169 points (+0.5%), to 34,212.00
Nasdaq futures (NQ=F): +169 points (+1.21%) to 14,155.75
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter