U.S. stocks ended the week slightly lower as investors evaluated mixed earnings reports and U.S. business activity data, while waiting for next week’s earnings from big tech to assess the health of corporate America. The recent purchasing managers’ index data unexpectedly climbed this month to almost a one-year high, propelled by stronger services and manufacturing that could reignite inflationary pressures. Resilient U.S. earnings, including HCA Healthcare and Procter & Gamble, have helped equities maintain their year-to-date gains, with a string of mega-tech companies’ earnings, including Alphabet, Meta Platforms, and Amazon, due next week.
The U.S. Treasury 2yr yields rose to around 4.2%, while the 10yr yields rose to 3.57%. Fed Bank of Philadelphia President Patrick Harker said the U.S. central bank is getting near the end of its tightening campaign, while his Cleveland counterpart Loretta Mester favored getting rates above 5% due to high inflation. Economic conditions may prompt the Fed to tighten policy more than current market expectations or ease monetary policy if conditions deteriorate, which could result in market volatility.
Oil futures ended higher on Friday but posted a weekly loss for the first time in five weeks due to demand concerns stemming from worries about the economic outlook. The price of WTI and Brent posted their lowest closes of the month on Thursday as analysts raised concerns about the deteriorating economic backdrop and hawkish Federal Reserve, which weighed on consumer demand. The downward trend was further exacerbated by reports that Russian crude shipments continue despite sanctions and embargoes and China’s “deep, lingering, persistent” skepticism over its growth potential. Despite OPEC+ allies announcing cuts of around 1.15 million barrels a day, analysts suggest that the market is still amply supplied, and more production cuts will be needed to stabilize prices in the medium term.