On Friday, Wall Street experienced a slight retreat from its record highs, with U.S. stock indexes showing mixed results in the wake of varied earnings reports from large corporations.
The S&P 500 index saw minimal movement, declining by less than 0.1%. This followed a rally just a day earlier, when it came within 0.1% of its record high achieved the previous month. The Dow Jones Industrial Average fell by 165 points, or 0.4%, while the Nasdaq composite gained 0.4%.
Despite these fluctuations, the S&P 500 managed to conclude its first positive week in three, supported by reports indicating that companies reported stronger profits at the end of 2024 than analysts had predicted.
This positive trend has allowed the market to navigate concerns related to rising interest rates and persistent inflation.
One of the standout performers was Airbnb, which saw a notable 14.4% increase in its stock price after reporting better-than-expected profits for the most recent quarter, attributed to increased booking activity.
In a similar vein, Wynn Resorts’ stock jumped by 10.4% after surpassing earnings expectations, largely benefiting from robust operations in Las Vegas.
Conversely, Applied Materials experienced a setback, with its stock dropping by 8.2%. Despite reporting stronger-than-anticipated profits, the company’s revenue forecast fell short of Wall Street expectations, leading to its decline.
Overall, the S&P 500 concluded the day at 6,114.63, down 0.44. The Dow ended at 44,546.08 after a 165.35-point drop, while the Nasdaq composite rose by 81.13 to close at 20,026.77.
In the bond market, Treasury yields decreased following news that U.S. retail sales experienced a more significant decline than economists anticipated last month.
Factors such as severe weather conditions, including extreme cold in the South and destructive wildfires in California, were thought to have deterred shoppers from visiting stores and dealerships.
Investor sentiment has been focused on achieving a “Goldilocks” scenario—economic data that is neither too weak, raising concerns of a recession, nor too strong, which could heighten inflationary pressures.
Recent data has shown surprising inflation levels, causing some unease regarding household budgets and leading to speculation that the Federal Reserve may hesitate to reduce interest rates.
Inflation could also be influenced by tariffs recently announced by former President Trump. Nevertheless, the U.S. stock market has shown resilience, with many believing that Trump views tariffs more as a negotiating tactic than a path to a damaging trade war.
His latest tariff announcements, for instance, are set to be implemented over the coming weeks, providing room for negotiations that could mitigate potential impacts.
“The tariffs on Chinese goods are currently in play,” noted Brian Jacobsen, chief economist at Annex Wealth Management.
“However, the other potential tariffs that have been discussed are yet to take effect, leaving space for discussions and possible resolutions.”
The current calmness in the market could pose risks if it leads to unexpected developments or emboldens further aggressive actions by Trump.
In bond trading, the yield on 10-year Treasuries saw a decline to 4.47% from 4.54% at the close on Thursday. This yield has experienced volatility since the Federal Reserve initiated significant rate cuts in September as part of a strategy to drive down borrowing costs and stimulate the economy, boosting investor returns across various sectors.
Although the 10-year yield has generally been rising—contrary to the Fed’s moves on short-term rates—this is due to stronger economic performances as well as mounting concerns regarding tariffs and surging deficits, which have the potential to heighten inflation alongside economic activity.
At the end of 2024, the Fed indicated that it might limit cuts in 2025, due to persistent inflation concerns, aiming to maintain inflation rates around 2%, as lowering rates can further fuel inflation.
Globally, stock markets reflected mixed results, with indexes in Europe and Asia showing varied performances.
Notably, Hong Kong’s Hang Seng index surged by 3.7%, with technology stocks like Tencent, Xiaomi, and Alibaba showing significant gains.
