Is Inflation Tamed? S&P 500 Kicks Off Year Optimistically, But Still Bumps In The Road For Tesla

The S&P 500 traded higher in the opening week of 2023 on optimism the Federal Reserve is making progress on taming inflation.

On Friday, the Labor Department reported the U.S. economy added 223,000 jobs in December, exceeding economist estimates of 200,000 new jobs. However, wage growth dropped to just 4.6% in the month, indicating to investors that inflation is still trending lower. 

On Wednesday, the Federal Open Market Committee released its November meeting minutes, and the Fed's language suggested a pivot to interest rate cuts might not come as soon as some investors had hoped. The Fed said it was "likely to take some time" before the Fed was convinced inflation was on a "sustained downward path" to its 2% long-term target. 

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Electric vehicle maker Tesla Inc TSLA reported 405,278 fourth-quarter vehicle deliveries on Tuesday, missing analyst expectations of 420,760 deliveries and sending Tesla shares down to new multi-year lows. The Tesla sell-off continued on Friday morning after the company cut prices on its Model Y and Model 3 EVs in China for the second time in three months. 

The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency issued a joint statement on Tuesday warning banks about the dangers of "frauds and scams" in the cryptocurrency market and "contagion risk within the crypto-asset sector." The statement came after the November collapse of cryptocurrency exchange FTX sent Bitcoin BTC/USD prices tumbling to their lowest levels in roughly two years. 

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Hot Potatoes: Lamb Weston Holdings Inc LW shares gained more than 10% this week after the frozen potato company reported a fiscal second-quarter earnings beat and raised its 2023 earnings guidance.

In the week ahead, the fourth-quarter earnings season kicks off with reports from Bed, Bath & Beyond Inc BBBY on Tuesday and big bank stocks Bank of America Corp BAC, Wells Fargo & Co WFC, Citigroup Inc C and JPMorgan Chase & Co. JPM on Friday.

Analysts expect S&P 500 energy companies to report 64.4% earnings growth in the fourth quarter, the highest of any market sector, according to FactSet. 

Economic Numbers: In the wake of the positive jobs report, Wall Street will get more key economic updates on Thursday when the U.S. Labor Department releases its December Consumer Price Index reading and on Friday when the University of Michigan releases its preliminary January U.S. Consumer Sentiment Index reading.

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