Stocks opened higher Friday thanks to a just-fine inflation report and a round of not-so-bad corporate earnings. But markets turned after the White House confirmed that it will levy tariffs against Mexico, Canada and China starting tomorrow, February 1.
This morning's release of the December Personal Consumption Expenditures Price Index (PCE) was generally well-received by investors. According to the Bureau of Labor Statistics, headline PCE was up 0.3% month over month and 2.6% year over year. This was faster than the respective increases of 0.2% and 2.4% seen in November.
Core PCE, which excludes volatile food and energy costs, rose 0.2% month over month, quicker than 0.1% in November. Year over year, core PCE was unchanged at 2.8%.
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The report also showed that personal income rose 0.4% in December, while consumer spending was up 0.7%.
"Some of that consumption buoyancy is thanks to robust capital markets and a declining savings rate, while another contributor stems from powerful wage growth," says José Torres, senior economist at Interactive Brokers. "Indeed, a separate report from a distinct federal agency known as the Bureau of Labor Statistics' Employment Cost Index (ECI) depicted accelerating compensation expenses on behalf of employers."
Specifically, ECI was up 0.9% from October to December, slightly faster than the 0.8% gain in Q3. Year over year, the Employment Cost Index was 3.8% higher in Q4, slower than the 3.9% increase from the third quarter.
"Overall, today's report was good news for the Federal Reserve as it suggests that wage inflation is softening, a sign that inflation pressures are easing," says Eugenio Alemán, chief economist at Raymond James."
Blue chip stocks move on earnings
In single-stock news, Apple (AAPL) stock opened more than 3% higher after the tech giant beat top- and bottom-line expectations for its fiscal first quarter. However, shares trended lower throughout the session, ending down 0.7% on an iPhone revenue miss and slumping China sales.
Chevron (CVX) was the worst Dow Jones stock Friday, sinking 4.5% as the oil major's fourth-quarter earnings miss offset a top-line beat. CVX also maintained its status as one of Wall Street's best dividend stocks for dependable dividend growth, hiking its quarterly payout this time by 4.9%.
Elsewhere, Visa (V) stock ended down 0.3% after the payments company's beat-and-raise quarter. And Intel (INTC) stock fell 2.9% as the chipmaker's weak first-quarter guidance offset higher-than-expected fourth-quarter results.
Walgreens sinks after suspending dividend
But one of the most buzzworthy stories occurred outside of the earnings calendar. Notably, Walgreens Boots Alliance (WBA) said it is suspending its quarterly dividend in order to conserve cash, sending the former Dow stock down 10.3% on the day.
"This change in capital allocation is aimed at strengthening WBA's balance sheet by reducing debt over time and improving free cash flow, as the company works toward achieving a retail pharmacy-led turnaround underpinned by a sustainable economic model," Walgreens said in a statement.
UBS Global Research analyst Kevin Caliendo said the dividend cut was "widely anticipated by investors" given Walgreens' fundamental struggles. He adds that by suspending its dividend, Walgreens is indicating that a potential buyout or large asset sale will not occur in the near term.
As for the main indexes, the Dow Jones Industrial Average closed down 0.8% at 44,544, the S&P 500 shed 0.5% to 6,040, and the Nasdaq Composite gave back 0.3% to 19,627.
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