Rosalind Evans
Wall Street experienced a day of mixed signals and fluctuating fortunes as stocks hovered near record levels, oil prices surged, and bond yields eased. The S&P 500, still within 0.3% of its all-time high set two years ago, remained virtually unchanged, while the Dow Jones Industrial Average faced a modest decline. The Nasdaq composite, on the other hand, posted slight gains. Amid these market movements, concerns about potential disruptions to oil supplies drove crude prices higher, providing a focal point for investors. A barrel of benchmark U.S. oil gained 2.7%, mainly due to worries stemming from Yemen’s Houthi rebels. These developments in the financial world come as inflation data takes center stage, affecting investor confidence and expectations for future interest rate cuts.
Interest rates are one of the main levers that set where stock prices are. The other is how much profit companies are making. Analysts expect the S&P 500 to deliver a second straight quarter of growth after earlier faltering under the weight of high inflation.
The reporting season for the end of 2023 unofficially got underway Friday with a bevy of reports from banks. Bank of America fell 2.1% after its profit for the last three months of 2023 fell short of analysts’ estimates. Wells Fargo lost 2.3% after matching analysts’ expectations, while JPMorgan Chase rose 1.2% despite reporting weaker results than expected.
“The danger of Fed fine-tuning is that they could be fiddling while the economy is burning down,” warns Brian Jacobsen, chief economist at Annex Wealth Management. “If they’re data-dependent, they’re looking in the rearview mirror. Now they need to shift their gaze forward through the windshield.”
UnitedHealth Group fell 3.5% despite topping analysts’ profit forecasts. Medical costs for the healthcare giant soared, worrying investors.
Delta Air Lines sank 7.9% even though it reported more robust profit and revenue for the final three months of 2023 than analysts had forecast. The carrier gave a forecasted range indicating its upcoming full-year profit could be below what analysts had expected.
Airlines and other travel-related companies were also hurt by the jump in oil prices, which put pressure on fuel costs. United Airlines fell 8.7%, and Norwegian Cruise Line Holdings lost 3.9%.
Meanwhile, stocks of energy companies were leading the S&P 500 with an overall gain of 1%. Valero Energy rose 2.6%, and Marathon Oil climbed 2.1%.
As the market keeps a watchful eye on inflation, these crosscurrents continue to shape the financial landscape. The fluctuating fortunes of stocks, the surge in oil prices, and the easing of bond yields provide a backdrop to a market marked by uncertainty. Brian Jacobsen’s cautionary words about the Federal Reserve’s role in these economic developments remind investors and policymakers alike of the challenges. With interest rates and corporate profits playing pivotal roles, the road ahead for Wall Street remains uncertain. As we move forward, the key will be navigating the shifting economic landscape with a clear vision through the windshield rather than relying solely on the rearview mirror.
