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How are stocks trading?

• The S&P 500
  SPX,
  +1.67%
  gained 59 points, or 1.6%, to 3,866.

• The Dow Jones Industrial Average
  DJIA,
  +1.98%
  rose 589 points, or 1.8%, to 32,623.

• The Nasdaq Composite
  COMP,
  +1.80%
  advanced 181 points, or 1.7%, to 10,974.

Both the S&P 500 and Nasdaq were on track to cement their second weekly gain in a row on Friday, although the tech-heavy Nasdaq has substantially lagged after Thursday’s performance, where it was the only one of the major indexes to finish in the red following abysmal earnings from Meta Platforms Inc.

Barring an intraday turnaround, the Dow is on track to log its fourth straight weekly advance. It remains down just 10.2% so far this year.

The blue-chip gauge has risen 5% so far this week, while the S&P 500 is up 3.1% and the Nasdaq has risen 1.1%.

What’s driving markets?

All eyes were on the Dow Friday as the blue-chip gauge was the only major index to reach new notable highs late this week as its advance during the month of October has somewhat ameliorated its losses for the year so far.

The Dow has risen 13.5% since the start of the month, leaving it on track for its best October performance since it was created in the late 19th century.

Perhaps the biggest reason for the Dow’s rise this month is tied to its composition. The average is generally light on technology stocks, while including more of the energy and industrial stocks that have outperformed this year.

“The Dow just has more of the winners embedded in it and that has been the secret to its success,” said Art Hogan, chief market strategist at B.Reily Wealth.

Despite some volatility in the premarket session, all three major indexes turned higher after the open as investors remained fixated on expectations for the Fed to down shift to smaller interest rate hikes after next week’s policy meeting — an expectation that endured after the latest reports on inflation and wage growth released Friday.

See:Market expectations start to shift in direction of slower pace of rate hikes by Fed

Brad Conger, deputy chief investment officer at Hirtle, Callaghan & Co., said Friday’s data didn’t interfere with mounting expectations that the Fed might soon pause its campaign of aggressive rate hikes.

“Basically, the market is starting to price in a pause, not a pivot, but maybe a pause. The end is in sight,” Conger said.

The September core personal consumption expenditures price index — the Fed’s preferred gauge of inflation pressures — came in roughly in line with economists expectations, while a more modest 1.2% gain in private wages and salaries in the third quarter was interpreted as a sign that wage growth may have finally peaked, according to Andrew Hunter, senior U.S. economist at Capital Economics.

“The Federal Reserve has not yet broken the persistent trend in core inflation and so will likely stay aggressive at next week’s meeting. However, some areas of the economy show significant weakness and could build the case that the Fed downshifts to smaller rate hikes in 2023,” Jeffrey Roach, Chief Economist for LPL Financial in Charlotte, NC, said.

The final reading of the University of Michigan consumer sentiment index for October added 1.3 index points from 58.6 in September, and was up slightly from an initial reading of 59.8 earlier in the month.

See: GDP looked great for the U.S. economy, but it really wasn’t

Since the start of the week, investors have digested a batch of disappointing numbers from some of America’s largest tech companies, which helped to sully the overall quality of S&P 500 earnings this quarter.

On Thursday night, Amazon.com
AMZN,
-9.29%
joined Microsoft Corp.
MSFT,
+2.75%,
Alphabet Inc.
GOOGL,
+2.76%
and Meta
META,
+0.34%
by publishing disappointing earnings for the quarter that ended Sept. 30.

But despite the disappointing results reported this week, in aggregate, S&P 500 firms are beating earnings expectations by 3.8%, according to Refinitiv data. That’s compared to a long-term average of 4.1% since 1994. However, if energy firms are excluded, the picture darkens substantially.

Opinion: The cloud boom has hit its stormiest moment yet, and it is costing investors billions

Shares of Amazon were off 10% after the e-commerce giant, which dominates the consumer-discretionary sector, predicted slower holiday sales and profit while also reporting slower-than-expected growth in its key cloud-computing business.

Peter Garnry, head of equity strategy at Saxo Bank, said investors were unnerved by Amazon’s guidance cut.

“The outlook for Q4 was what terrified investors with the retailer guidance operating income in the range $0-4 billion vs est. $4.7 billion and revenue of $140-148 billion vs est. $155.5 billion,” he said in a note.

One notable exception to the downbeat earnings news this week was Apple Inc.
AAPL,
+7.21%,
which proved a bright spot after the iPhone maker’s revenue and earnings topped forecasts, helped by record back-to-school sales of Macs. Shares were up nearly 0.9% in premarket trading.

Companies in focus

• Oil giants Chevron Corp. CVX and Exxon Mobil Corp. XOM were climbing on Friday after reporting strong results. Chevron is a Dow component.

• Pinterest Inc. PINS also saw strong sales and profit in the third quarter, beating Wall Street expectations. Its shares were up more than 14%.

• Intel Corp. INTC shares advanced more than 8% after reporting an earnings beat. The chip maker said it would cut costs by $3 billion next year, and lay off employees, as it trimmed its outlook again.

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