Stocks finished higher Friday, while Treasury bond yields paused their weekly decline and the dollar held near six-month lows, as markets looked to re-set rate hike expectations into the unofficial start to the fourth-quarter earnings season.
The Dow Jones Industrial Average finished up 112 points, 0.33%, to 34,302, while the S&P 500 gained 0.40%. The tech-focused Nasdaq advanced 0.71%.
For the week, the Dow was up 2%, the S&P 500 gained 2.67% and the Nasdaq climbed 4.82%.
A largely in-line reading for U.S. inflation, which slowed to the lowest levels in more than year last month, alongside last week's better-than-expected jobs report and a host of data indicating softening price pressures, has triggered big changes in rate bets and sparked notable rally in Treasuries.
A stronger-than-expected reading for consumer sentiment, from the University of Michigan's monthly survey, which also included a modest increase in near-term inflation expectations, pared some of those gains in early Friday trading.
Benchmark 10-year note yields, which move in the opposite direction of prices, rose about 7 basis point from their four-week low in overnight dealing to 3.504% and are down nearly 20 basis points for the week. Over the same timeframe, 2-year have retraced by around 10 basis points to 4.234% as bets on big near-term rate hikes continue to fade.
The U.S. dollar index, which tracks the greenback against a basket of six global currency peers, was marked 0.04% lower at $102.201, close to the lowest levels in more than six months.
The CME Group's FedWatch now indicates a 94.2% chance of a 25 basis point rate hike from the Fed on February 1, up from around 75.7% this time last week, with traders expecting the Fed Funds rate to peak at a range of between 4.75% and 5% in the early spring.
That's given stocks solid momentum heading into the earnings season, which kicks-off with a series of investment banking earnings, along with Dow component UnitedHealth Group, prior to the start of trading.
Analysts expect S&P 500 earnings to fall 2.2% from last year to a share-weighted $447.1 billion, the first quarterly decline in more than two years. Stripping out the energy sector, however, and the decline expands to around 6.7%.
JPMorgan (JPM) shares gained 2.5% higher after it topped Street forecasts with earnings of $3.57 per share on revenues of $34.38 billion, but set aside $2.3 billion in reserves to set against bad loans and credit losses, topping analysts' forecast of a $1.8 billion total for credit provisions.
Wells Fargo (WFC) also posted stronger-than-expected fourth quarter earnings, but booked a larger portion of its reserves to compensate for rising loan risks as interest rates rise and the economy slows. Shares finished up 3.3%.
UnitedHealth Group (UNH )slipped 1.3% despite posting better-than-expected fourth quarter earnings, powered once again by double-digit revenue gains from its Optum division, and confirmed its full-year profit forecasts.
Tesla (TSLA) shares slumped nearly 1% after the carmaker unveiled yet another round of deep price cuts in its key global markets ahead of its fourth quarter earnings later this month.
Boeing (BA) shares edged 0.2% lower following news that the planemaker's workhorse 737 Max jet made its first commercial flight in China in nearly four years.
In overseas markets, the the region-wide MSCI ex-Japan index rose 1.27% to a fresh seven-month high into the close of trading, while Tokyo's Nikkei 225 slumped 1.25% as the yen surged to a seven-month high against the U.S. dollar amid reports of tighter monetary policy next week from the Bank of Japan.
Europe's Stoxx 600 was marked 0.55% higher by the close of Frankfurt dealing, while London's FTSE 100 was up 0.69%.
