Wall Street extends rally, fueled by tech upturn

  • Baker Hughes falls on missing profit estimates for the fourth quarter
  • Activist investor Elliott Management takes stake in Salesforce
  • Chips rise on Barclays upgrade
  • Indexes up: Dow 0.76%, S&P 1.19%, Nasdaq 2.01%

NEW YORK, Jan 23 (Reuters) – Wall Street closed sharply higher on Monday, buoyed by rising technology stocks as investors kicked off an earnings-heavy week with renewed enthusiasm for market-leading momentum stocks that suffered last year.

All three major stock indexes extended Friday’s gains, with tech-heavy Nasdaq leading the pack, boosted by semiconductor stocks (.SOX).

“(Chips are) a group that has been depressed, so I’m not too surprised,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “We’re going to see earnings from these companies over the next couple of weeks, and that will be where the rubber meets the road.”

“It’s a group that was ripe for an upswing.”

The session marks a calm before the storm in a week packed with high-profile earnings reports and the back end loaded with key financial data.

Investors are almost certain the Federal Reserve will implement a small rate hike next week, even as the U.S. central bank remains committed to taming the hottest inflation cycle in decades.

“(Investors) are pretty comfortable that they’re going to see lower rate hikes from the Fed, that we’re turning the corner on inflation and rate hikes,” Tuz added. “Equities can do well in that environment, especially the large growth stocks that drive the market.”

Financial markets have priced in a 99.9% probability of a 25 basis point increase to the Fed Funds target rate at the conclusion of the two-day monetary policy meeting next Wednesday, according to CME’s FedWatch tool.

The Dow Jones Industrial Average (.DJI) rose 254.07 points, or 0.76%, to 33,629.56, the S&P 500 (.SPX) gained 47.2 points, or 1.19%, to 4,019.81 and The Nasdaq Composite added (2.2IXIC)9 points. 2.01% to 11,364.41.

Of the 11 major S&P 500 sectors, all but energy (.SPNY) ended in the green, with technology stocks (.SPLRCT) posting the biggest percentage gain, up 2.3% on the session.

The fourth quarter reporting season has gone into overdrive, with 57 of the companies in the S&P 500 posting results. Of these, 63% have delivered better earnings than expected, according to Refinitiv.

Analysts now see fourth-quarter S&P 500 earnings, on the whole, falling 3% year over year, nearly twice as steep as the 1.6% annual decline at the start of the year, per Refinitiv.

This week, Microsoft Corp ( MSFT.O ) and Tesla Inc, along with a number of heavy-hitting industrials including Boeing CO ( BA.N ), 3M Co ( MMM.N ), Union Pacific Corp ( UNP.N ), Dow Inc ( DOW .N), and Northrop Grumman Corp ( NOC.N ), are expected to post quarterly results.

The Philadelphia SE semiconductor index ( .SOX ) jumped 5.0%, its biggest one-day gain since Nov. 30, after Barclays upgraded the sector to “overweight” from “equal weight.”

Tesla rose 7.7 percent after CEO Elon Musk took the stand in his fraud lawsuit related to a tweet that said he supported taking the electric car maker private.

Baker Hughes Co ( BKR.O ) missed quarterly earnings estimates due to inflationary pressures and ongoing disruptions from Russia’s war on Ukraine. The oilfield service company’s shares fell 1.5%.

Cloud software firm Salesforce Inc ( CRM.N ) rose 3.1% on news that activist investor Elliot Management Corp has taken a multibillion-dollar stake in the company.

Spotify Technology SA ( SPOT.N ) joined the growing list of tech-related companies to announce impending layoffs, shedding 6% of its workforce as rising interest rates and the looming possibility of a recession continue to weigh on growth stocks. The music streaming company’s shares rose 2.1%.

On the economic front, the US Commerce Department is expected to reveal its first “progress” on fourth-quarter GDP on Thursday, which analysts expect to land at 2.5%.

On Friday, the Comprehensive Personal Consumption Expenditure (PCE) report is due to shed light on spending, income growth and inflation, which is crucial.

Advances outnumbered decliners on the NYSE by a ratio of 2.77 to 1; on the Nasdaq, a ratio of 1.73 to 1 favored advances.

S&P 500 posted 11 new 52-week highs and no new lows; The Nasdaq Composite recorded 82 new highs and 19 new lows.

Volume on US exchanges was 11.99 billion shares, compared to the average of 10.62 billion over the last 20 trading days.

Reporting by Stephen Culp; Additional reporting by Shreyashi Sanyal and Johann M Cherian in Bengaluru Editing by Marguerita Choy

Our standards: Thomson Reuters Trust Principles.

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