Wall Street inches higher on back of economic data as holiday looms

Wall Street stocks closed higher on Friday, injecting a much-needed sliver of holiday cheer after investors probed new data for clues on likely Federal Reserve thinking.

The benchmark S&P 500 erased earlier losses to end 0.6 per cent higher, eventually dragging the Nasdaq Composite with it. The tech-heavy index closed up 0.2 per cent. Volumes were generally light as year-end holidays began in earnest.

Friday’s gains were not enough, however, to stop either benchmark closing lower for a third consecutive week — the first such losing streak since September. With just four days of trading left in 2022, the S&P 500 and the Nasdaq Composite have this year lost about 20 per cent and 33 per cent, respectively, putting them on course for their worst performances since the 2008 financial crisis.

Elsewhere, the FTSE All World share index has shed about a fifth of its value this year, while Bloomberg’s broad aggregate index of the global bond market is off about 16 per cent.

“The past two weeks have been a weak gruel of fatalism mostly and halfhearted optimism,” said Mike Zigmont, head of trading and research at Harvest Volatility Management. “It’s a weird psychological condition and it strikes me that the market [and] investors need a rest.”

Treasuries slid, pushing yields on benchmark 10-year bonds to 3.75 per cent — their highest this month. The two-year Treasury yield was up 0.06 percentage points at 4.33 per cent. Debt markets closed early on Friday for the holiday.

Data earlier in the day showed US consumer income held up in November but spending slowed slightly, mostly in line with economists’ forecasts. Also in-line were inflation figures in the report, showing the core personal consumption expenditure price index — the Fed’s favoured measure of price pressures — rose 0.2 per cent month-on-month in November.

The annual rate of growth for the core measure cooled to 4.7 per cent in November from 5 per cent the previous month.

Together with a larger-than-expected drop in orders for durable long-lasting goods, the reports provided “further evidence that the [US] economy has lost momentum”, said Andrew Hunter, US economist at Capital Economics.

Slowing growth may encourage the Fed to moderate its plans to tighten monetary policy further. Policymakers raised interest rates half a percentage point in December, following four consecutive 0.75 percentage point increases. However, the central bank has also been clear that it plans to raise rates to just above 5 per cent next year, up from the current target range of 4.25 per cent to 4.5 per cent, with no rate cuts until 2024.

Currency markets were largely rangebound on Friday, leaving the dollar 0.1 per cent lower against a basket of six other international currencies, but up 9 per cent for the year.

Oil prices ticked higher, with international benchmark Brent crude up 3.7 per cent at $83.97 a barrel.

Elsewhere in equity markets, Hong Kong’s Hang Seng index fell 0.4 per cent, China’s CSI 300 dropped 0.2 per cent, South Korea’s Kospi slid 1.8 per cent and Japan’s Topix lost 0.5 per cent.

The regional Stoxx Europe 600 was flat and London’s FTSE 100 ended a half-day UK trading session marginally higher.