Stocks drift as strong week for Wall Street heads for close

Traders work on the floor at the New York Stock Exchange in New York, Friday, July 1, 2022. (AP Photo/Seth Wenig, File)

NEW YORK (AP) — Stocks are drifting Friday as a strong week for Wall Street appears to be heading for a quiet close.

The S&P 500 was 0.3% higher after flipping between small gains and losses through the morning. It's on pace for its third winning week in the last four and near its highest level since the start of December. The Dow Jones Industrial Average was up 53 points, or 0.2%, at 34,003, as of noon Eastern time, while the Nasdaq composite was 0.7% higher.

Helping to lead the way was American Express, which jumped 10.7% despite reporting weaker profit and revenue for the latest quarter than expected. It gave a forecast for earnings through 2023 that topped Wall Street’s expectations and announced a planned increase to its dividend.

Another big gain for Tesla's stock was also supporting the market. It rose 8.8% following its stronger-than-expected profit report for the end of 2022 released earlier in the week.

Weighing on Wall Street were falling stocks across the chipmaking industry following a jolting warning from Intel. Not only did its revenue and earnings fall short of expectations last quarter amid a punishing slowdown in sales, it also gave a forecast for revenue this quarter that was more than $2 billion short of analysts’ expectations.

Chipmaker Intel fell 7.1%, and its forecast helped drag down stock across the industry.

Hasbro fell 6.8% after saying it “underperformed” in this past holiday shopping season and will likely report a 17% drop in revenue for the fourth quarter. The company will cut about 1,000 jobs to reduce costs.

So far, the job market has remained remarkably resilient despite a slowing overall economy. Almost all of the high-profile layoff announcements have been within the tech industry, which raced to expand after the pandemic sent demand for technology soaring. But layoffs may be starting to spread to other industries.

Earnings reporting season is entering its heart, and companies have been offering mixed results and forecasts. That’s helped lead to some big swings in markets.

Two competing big ideas have been sending Wall Street veering up, down and back again recently. On one hand are worries about a steep drop-off in profits and a severe recession for the economy following all the Federal Reserve's increases to interest rates last year meant to crush inflation. On the other are hopes that cooling inflation may allow the Fed to take it easier on rates.

Economic reports on Friday backed up recent data points suggesting inflation continues to moderate. The measure that the Fed prefers, which strips out food and energy costs, was 4.4% higher in December than a year earlier. That was down from 4.7% inflation in November and was equal to economists’ expectations.

More broadly, inflation slowed to 5% in December from a year earlier, down from 5.5% in November, according to the personal consumption expenditures price index.

Reports also showed that income growth for Americans slowed in December, while consumer spending fell off a bit more sharply than expected.

A separate report said U.S. consumers are also downshifting their expectations for inflation in the coming year. Over the long run, the University of Michigan said inflation expectations among consumers remain roughly where they've been for most of the last 18 months. Keeping such expectations anchored is key for the Fed, which wants to avoid a vicious cycle where households expecting high inflation make moves that only make it worse.

Economists said Friday's data likely keeps the Fed on track to raise its key benchmark rate by 0.25 percentage points at its meeting next week. That would be a step down from its increase of 0.50 points last month and four straight hikes of 0.75 points before that.

Smaller increases would mean less added pressure on the economy, which has already seen damage done to the housing industry and other areas because of last year's surge in rates.

The yield on the 10-year Treasury, which sets rates for mortgages and other important loans, ticked up to 3.52% from 3.51% late Thursday. The two-year yield, which moves more on expectations for Fed actions, rose to 4.21% from 4.19%.

Next week could be another busy one for markets, with several high-profile events on top of the Fed's announcement. The European Central Bank will give its latest decision on rates, the U.S. government will release its latest monthly check on the jobs market and more than 100 companies in the S&P 500 will report their quarterly results.

In stock markets overseas, India's Sensex fell 1.5% as the Adani Group was again hit by heavy selling. Shares in seven Adani companies have plunged this week, wiping out billions of dollars in market value, after short-selling firm Hindenburg Research said it was betting against the conglomerate, which has holdings in energy, data transmission, construction and other major industries.

The Adani Group said it was considering legal action against the U.S.-based firm Hindenburg Research following its allegations of stock market manipulation and accounting fraud.

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AP Business Writers Yuri Kageyama and Matt Ott contributed.