Stocks unsteady on Wall Street amid mixed economy data

Economy Dec 23, 2022 2:30 PM EST

NEW YORK (AP) — Stocks wavered in afternoon trading on Wall Street Friday and
headed for weekly losses as investors reviewed mixed news on the economy.

READ MORE: Commerce Department inflation gauge shows price increases slowing to 5.5
percent

The S&P 500 shook off an early loss and inched up 0.3 percent as of 1:03 p.m.
Eastern. The Dow Jones Industrial Average was up 128 points, or 0.4 percent, to
33,152 and the Nasdaq fell 0.1 percent. The S&P 500 and Nasdaq are on track for a
third straight week of losses.

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 percent 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 percent to 3.1 percent seen for almost all of the last
year and a half, at 2.9 percent.

Treasury yields rose following the reports. The yield on the 10-year Treasury,
which influences mortgage rates, rose to 3.74 percent from 3.69 late Thursday. The
yield on the two-year Treasury, which tends to track actions by the Fed, rose to
4.32 percent from 4.28 percent.

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.

WATCH: How inflation is changing the way some Americans celebrate the holidays

“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 percent to 4.5 percent, and
Fed policymakers forecast that the rate will reach a range of 5 percent to 5.25
percent 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 percent 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.