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New York – U.S. stocks closed largely unchanged Friday, concluding a volatile week with broad market indexes posting losses as the fourth-quarter earnings season commenced. Investors navigated mixed sector performance and lingering concerns over economic policy.
Sector Performance
The healthcare sector (.SPXHC) shed 0.8%, leading the day's declines among S&P 500 companies. Conversely, chipmakers saw gains, with the semiconductor index (.SOX) climbing 1.2%, extending a positive trend from Thursday.
Banking Sector and Rate Worries
Major U.S. financial institutions reported largely robust earnings as the S&P 500 earnings period opened. However, shares of banks and other financial firms faced pressure from President Donald Trump's proposal to cap credit card interest rates at 10% annually. The S&P 500 financial sector (.SPSY) edged up 0.1% on Friday, but still marked its largest weekly percentage drop since October.
Federal Reserve Speculation
Market sentiment was also influenced by news that President Trump may retain economic adviser Kevin Hassett, tempering expectations of Hassett succeeding Federal Reserve Chair Jerome Powell.
Market Strategist Outlook
Anthony Saglimbene, chief market strategist at Ameriprise Financial, suggested that ending the week near flat with the S&P 500 close to 7,000 points is a satisfactory outcome for most investors two weeks into the new year.
Saglimbene noted that the current market flatness is partly attributable to the early stage of earnings season. "Bank earnings are showing a generally favorable economic and business backdrop," he stated. "Now we're going to start seeing other companies tied to other sectors, and that's going to give us a better take on fundamental conditions."
Weekly Performance Summary
For the week, the S&P 500 (.SPX) declined 0.38%, the Nasdaq Composite (.IXIC) fell 0.66%, and the Dow Jones Industrial Average (.DJI) retreated 0.29%. The Dow closed Friday down 83.11 points, or 0.17%, at 49,359.33, while the S&P 500 lost 4.46 points, or 0.06%, to 6,940.01. The Nasdaq Composite ended down 14.63 points, or 0.06%, at 23,515.39.
Upcoming Earnings and Investor Caution
The earnings calendar intensifies next week with reports from industry giants including Netflix (NFLX.O), Johnson & Johnson (JNJ.N), and Intel (INTC.O). Investors also exercised caution, avoiding significant bets ahead of Monday's market closure for the Martin Luther King Jr. holiday.
Mid-January Market Dynamics
While equities have traded within a narrow range recently, some options market participants anticipate continued volatility following Friday's monthly options expiration. Bruce Zaro, managing director at Granite Wealth Management, observed that the middle of January typically exhibits choppiness.
"Once we work our way through that, then we are likely to see a little bit better performance out to the end of the month," Zaro commented, expressing hope for a positive monthly close that could signal a strong year.
Sector Rotation and Small-Cap Strength
The past week also saw capital shift from some large technology firms into more undervalued segments, with mid- and small-cap stocks outperforming the broader S&P 500 index. The small-cap Russell 2000 (.RUT) reached a new record closing high on Friday, finishing the week with a 2.04% gain.
Several major S&P 500 sectors posted weekly advances, with real estate (.SPLRCR), consumer staples (.SPLRCS), and industrials (.SPLRCI) leading the gains. On the New York Stock Exchange, declining issues outnumbered advancers by a 1.19-to-1 ratio. The Nasdaq saw 2,034 stocks rise against 2,719 decliners. U.S. exchange volume totaled 18.77 billion shares, exceeding the 16.85 billion average for the last 20 trading days.