April 28, 2023

Nasdaq set for +1% weekly gain on strong tech earnings; Dow, S&P 500 also rise

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U.S. stocks on Friday were headed for a higher weekly finish, with sentiment being helped by a string of strong results from major technology names and favorable inflation data.

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Meanwhile, financial jitters around the regional banking space also garnered some of the spotlight during the week amid a steadily worsening situation at First Republic Bank.

Wall Street’s major averages were on track to end the final session of the week higher, with the benchmark S&P 500 (SP500) up 0.65% to 4,162.32 points into the final hour of trading and the blue-chip Dow (DJI) rising 0.64% to 34,042.25 points.

The tech-heavy Nasdaq Composite (COMP.IND) had added 0.49% to 12,201.20 points, boosted by a surge in shares of Intel (INTC) after the chip giant’s guidance signaled that the PC downturn was nearing an end. Gains in the index were capped by a fall in shares of Amazon (AMZN), which slipped after issuing a warning on cloud growth.

For the week, the S&P and Dow were set to end 0.70% higher each, while the Nasdaq was heading for a gain of 1.07%.

Of the 11 S&P sectors, ten were trading in the green, led by Energy and Financials. Utilities was the sole loser.

First Republic Bank (FRC) resumed its selloff, shedding nearly 40% after a report that the lender was most likely heading for Federal Deposit Insurance Corp. receivership. The report reignited jitters over the regional banking space. The worries were exacerbated by a Fed review that found that central bank supervisors had not fully appreciated the extent of the vulnerabilities at Silicon Valley Bank.

Sentiment was helped by economic data on Friday which showed that the core personal consumption expenditure (PCE) index – a key inflation gauge monitored by the Federal Reserve – rose 0.3% in March, unchanged from February. On a Y/Y basis, core PCE gained 4.6%. Personal spending came in unchanged.

In a separate report, the employment cost index (ECI) for Q1 ticked up +1.2% from +1.1% in Q4 2022. The reading is watched by Fed policymakers to see if there is a danger of a wage-price spiral emerging.

“The sequential increases (in the ECI) had been moderating over the course of last year, but the 1Q reading halted that improvement,” JPMorgan’s Michael Feroli said.

“Powell has signaled that something closer to 3.5% wage growth is more consistent with 2% inflation, and today’s strong print is yet another reason for the Fed to be inclined to hike next week. By industry, the firming last quarter was entirely in the goods-producing industries. The ECI is often considered the single best gauge of overall wage inflation,” Feroli added.

According to the CME FedWatch tool, the probability of a 25 basis point hike by the Fed’s monetary policy committee at its meeting next week is now at 88%.

Rounding out Friday’s economic calendar was an unexpected rise in Chicago PMI for April, though the index stayed in contraction territory, and an unchanged consumer sentiment reading from the University of Michigan.

Turning to the fixed income markets, yields were lower after their big jump in the previous session. The longer-end 10-year yield (US10Y) was down 9 basis points to 3.44%, while the more rate-sensitive 2-year yield (US2Y) was down 6 basis points to 4.04%.

Among other earnings movers, First Solar (FSLR) sank and was among the top percentage losers on the S&P 500 (SP500) after reporting a hefty fall in quarterly revenue. Conversely, Eastman Chemical (EMN) was one of the top S&P percentage gainers despite mixed results.