How are stocks trading?

The Dow Jones Industrial Average
DJIA,
+2.52%
jumped almost 831 points, or 2.6%, to 32,864.

The S&P 500
SPX,
+2.41%
gained almost 93 points, or 2.4%, to 3,900.

The Nasdaq Composite
COMP,
-6.57%
advanced about 295 points, or 2.7%, to 11,087.

The S&P 500 and Nasdaq each were on track to cement their second straight weekly gain, while the Dow is on pace for its fourth straight weekly advance. The blue-chip gauge has risen 5.7% so far this week, while the S&P 500 is up 3.9% and the Nasdaq has risen 2.1%, according to FactSet data, at last check.

What’s driving markets?

Major U.S. stock benchmarks were up sharply Friday afternoon, as investors assessed fresh economic data that appeared to do little to shake their belief that the Federal Reserve might slow its pace of interest-rate hikes late this year.

For the most part, Friday’s economic data came in “pretty much” as expected, including readings on inflation, spending and income, according to Randy Frederick, managing director of trading and derivatives at Charles Schwab. That left the market’s hope intact that the Fed’s rate increase next week, which is expected to be a large, three-quarters of a percentage point move, will probably be the “the last one of that size,” he said in a phone interview.

All eyes were on the Dow Friday, with the blue-chip gauge’s strong advance during the month of October paring its 2022 losses to around 10%.

The Dow has surged around 14% so far this month, leaving the index 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.

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, said in emailed comments Friday.

Meanwhile, the final reading of the University of Michigan consumer sentiment index for October rose to 59.9, from 58.6 in September, and was up slightly from an initial reading of 59.8.

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

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

On Thursday night, Amazon.com Inc.
AMZN,
-7.33%
joined Microsoft Corp.
MSFT,
+4.15%,
Alphabet Inc.
GOOGL,
+4.47%
and Meta Platforms Inc.
META,
+1.27%
in releasing results that disappointed for the quarter that ended Sept. 30.

Still, in aggregate, S&P 500 companies are beating earnings expectations by 3.8%, according to Refinitiv data. That compares with a long-term average of 4.1% since 1994.

“Investors anticipated the worst-case scenario for earnings,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management, by phone Friday. While “expectations were set lower,” he said, “we’re seeing earnings still grow.” S&P 500 earnings are increasing at a slower rate, but investors haven’t seen the broad “falloff” that they feared, Schein said.

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 down more than 7% Friday afternoon 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,
+7.51%,
which proved a bright spot after the iPhone maker’s revenue and earnings topped forecasts, helped by record back-to-school sales of Macs. Apple shares jumped, trading up more than 7% Friday afternoon.

Which companies are in focus?

Oil giants Chevron Corp. CVX and Exxon Mobil Corp. XOM were rising Friday after reporting strong results. Shares of Chevron, which is a Dow component, edged up 0.6%, while Exxon gained 3%.

Pinterest Inc. PINS also saw strong sales and profit in the third quarter, beating Wall Street expectations. The company’s shares jumped more than 11%.

Intel Corp. INTC shares advanced almost 10% 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.

See also: Live Markets coverage

—Barbara Kollmeyer contributed to this report.