U.S. stocks closed barely changed on Friday, after wavering between modest gains and losses, as mixed bank earnings offset cooler-than-expected inflation news that buoyed hopes for interest-rate cuts from the Federal Reserve. The TSX closed modestly higher, supported by a rally in uranium stocks and bullish technical signals. It was the Canadian benchmark stock index’s highest close in 21 months.
Data showed U.S. producer prices unexpectedly fell in December as the cost of goods such as food and diesel fuel declined, while prices for services were unchanged for a third consecutive month, in contrast to Thursday’s hotter-than-expected consumer inflation reading.
Expectations for a rate cut of at least 25 basis points by the Fed in March moved up to 79.5%, according to CME’s FedWatch Tool, from 73.2% in the prior session. Friday’s data also sent Treasury yields lower, although recent comments by some central bank officials have pushed back on any potential rate cuts.
“The PPI tells us something that is a little bit different than the CPI,” said Michael Green, chief strategist at Simplify Asset Management in New York. “It raises the probability that the Fed has the free and clear to decide to cut interest rates and the equity market really doesn’t care all that much as long as rates are not pushing significantly higher.”
U.S. two-year yields dropped to their lowest since May at 4.119% in the wake of the data. They were last down 11.8 basis points at 4.142%. For the week, two-year yields, which reflect rate move expectations, were down 13.1 bps, their worst weekly showing in a month.
The benchmark U.S. 10-year yield, on the other hand, slid to a one-week trough of 3.916%, and was last at 3.955%, down 1.7 bps.
Canada bond moves largely reflected these moves. Swaps market pricing suggests an 89% chance the Bank of Canada would have cut its overnight interest rate by a quarter percentage point by the end of its April 10 policy meeting.
The Toronto Stock Exchange’s S&P/TSX composite index ended up 71.82 points, or 0.3%, at 20,990.22. For the week, it was up 0.3%.
“There’s a lot of confusion out there in the market among investors that are just following the news flow, the geopolitics and interest rates, but what they’re missing out (on) is the big picture,” said Brandon Michael, senior investment analyst at ABC Funds. “The market is being driven higher by technicals. The technicals are very bullish right now.”
The Toronto market has posted a series of higher peaks and troughs since October, notching a gain of nearly 12% over that period.
The technology sector added to its recent rally on Friday, rising 0.7%.
Energy rose 0.6% as oil settled 0.9% higher at US$72.68 a barrel following overnight air and sea strikes by the U.S. and Britain on Houthi targets in Yemen.
The materials sector, which includes precious and base metals miners and fertilizer companies, was up 1.6% as the price of gold benefited from safe-haven buying and the prospect of Federal Reserve interest rate cuts.
Shares of Canadian uranium miners Cameco, Denison Mines and NexGen Energy Ltd rallied after Kazakhstan-based miner Kazatomprom flagged a production shortfall in 2024. Cameco ended up 7.1%, Denison 10%, and NexGen 11.1%.
The Dow Jones Industrial Average fell 118.04 points, or 0.31%, to 37,592.98. The S&P 500 gained 3.59 points, or 0.08 %, at 4,783.83 and the Nasdaq Composite rose 2.58 points, or 0.02%, to 14,972.76.
For the week, the Dow gained 0.34%, the S&P 500 rose 1.84% and the Nasdaq climbed 3.09%. The gains for the S&P were the biggest weekly percentage rise since mid-December and for the Nasdaq, the largest since early November.
Bank of America fell 1.06% after its fourth-quarter profit shrank as the lender took $3.7 billion in one-off charges, while Wells Fargo’s warning of a 7% to 9% drop in net interest income in 2024 sent the bank’s shares down 3.34%.
But Citigroup rose 1.04% after reporting a $1.8 billion fourth-quarter loss and saying it expected further job cuts.
JPMorgan Chase edged 0.73% lower after reporting its best ever annual profit and forecasting higher-than-expected interest income for 2024.
The S&P 500 Banks index ended down 1.26% after falling as much as 1.7%.
The Dow fell, largely due to a 3.37% decline in UnitedHealth after the company reported higher-than-expected medical costs, accounting for about 120 points of downside pressure to the index.
Delta Air Lines tumbled 8.97% after the carrier scaled down its annual profit outlook.
Tesla lost 3.67% after trimming prices of some new China models and plans to suspend most car production at its factory near Berlin.
Advancing issues outnumbered decliners by a 1.4-to-1 ratio on the NYSE while on Nasdaq, decliners outpaced advancers by a 1.1-to-1 ratio on the Nasdaq. The S&P index recorded 37 new 52-week highs and no new lows, while the Nasdaq recorded 134 new highs and 86 new lows. Volume on U.S. exchanges was 10.57 billion shares, compared with the 12.06 billion average for the full session over the last 20 trading days.
Reuters, Globe staff