US stocks edge higher after mixed data on the economy

Stocks are edging higher on Wall Street in afternoon trading Friday and headed for weekly losses following a batch of mixed news on the economy.

The S&P 500 shook off an early loss and inched up 0.4% as of 3:27 p.m. Eastern. The Dow Jones Industrial Average was up 114 points, or 0.4%, to 33,141 and the Nasdaq slipped less than 0.1%. The S&P 500 and Nasdaq are on track for a third straight week of losses.

Oil and gas industry stocks were big gainers as energy futures prices closed broadly higher. Exxon Mobil rose 2.4%.

Retailers and communications services stocks also rose. The market's gains were kept in check by a pullback in technology and health care stocks. Chipmaker Nvidia fell 1.3% and Moderna slid 4.4%.

Markets are heading for a long weekend and will be closed on Monday for the Christmas holiday.

The government reported Friday that a key measure of inflation is continuing to slow, though it’s still far higher than anyone wants to see. The Federal Reserve monitors the inflation gauge in the consumer spending report, called the personal consumption expenditures price index, even more closely than it does the government’s better-known consumer price index.

Also, growth in consumer spending weakened last month by more than expected, but incomes were a bit stronger than expected. Markets are in a tricky situation where relatively solid consumer spending and a strong employment market reduce the risk of a recession but also raise the threat of higher interest rates from the Fed.

Helping to support the market was a report indicating U.S. households are lowering their forecasts for upcoming inflation. That could help avoid a scenario the Federal Reserve has said often it’s desperate to prevent: a vicious cycle where shoppers rush to make purchases in advance of expected price rises, which would only worsen inflation.

Consumers are preparing for inflation of 4.4% in the year ahead, according to final results for December from a survey by the University of Michigan. That’s better than the preliminary figures released earlier this month and the lowest such level measured in 18 months. Longer-term expectations for inflation are still within the tight band of 2.9% to 3.1% seen for almost all of the last year and a half, at 2.9%.

Treasury yields rose following the reports. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.75% from 3.69 late Thursday. The yield on the two-year Treasury, which tends to track actions by the Fed, rose to 4.31% from 4.28%.

The latest round of reports are the last big economic updates of the year and investors will soon turn their focus to the next round corporate earnings. Most investors are hoping to get a better sense of how consumers are doing through those reports and forecasts, along with the picture for corporate profits, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

"The stock market is in a tough spot,” he said “If the consumer starts slowing down, earnings are likely to decrease, but if the consumer remains strong, the Fed has to remain strong and interest rates keep rising.”

The Fed has been upfront about its plan to remain aggressive in raising interest rates in order to tame inflation, even though the pace of price increases continue to ease. The Fed has already hiked its key overnight rate to its highest level in 15 years, after it began the year at a record low of roughly zero. The key lending rate, the federal funds rate, stands at a range of 4.25% to 4.5%, and Fed policymakers forecast that the rate will reach a range of 5% to 5.25% by the end of 2023.

Their forecast doesn’t call for a rate cut before 2024. The high rates have raised concerns that the economy could slow too much and slip into a recession in 2023. High rates have also been weighing heavily on prices for stocks and other investments.

Inflation remains a global problem. Japan reported its core inflation rate, excluding volatile fresh foods, rose to 3.7% in November, the highest level since 1981, as surging costs for oil and other commodities added to upward price pressures in the world’s third-largest economy.

Markets in Asia fell and markets in Europe closed mixed.