Wall Street extends rally, driven by tech bounce

  • Baker Hughes fell on missing Q4 profit estimates
  • Activist investor Elliott Management takes a stake in Salesforce
  • Chips boom on Barclay’s upgrade
  • Indices Up: Dow 0.76%, S&P 1.19%, Nasdaq 2.01%

NEW YORK, Jan 23 (Reuters) – Wall Street closed sharply higher on Monday as a jump in technology stocks helped investors start an earnings-heavy week with renewed enthusiasm for stocks that led the market last year.

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

“[Chips are]a group that has been depressed, so I’m not too surprised,” said Peter Tudge, president of Chase Investment Council 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.”

“This is a group that was ripe for a rebound.”

Reflecting the calm before the storm in a week full of high-profile earnings reports and back-end deals filled with important economic data.

Investors are all but certain that the Federal Reserve will implement a modest interest rate hike next week, even as the US central bank remains determined to tame the hottest inflation cycle in decades.

“(Investors) are very comfortable that they’re going to see fewer rate hikes from the Fed, that we’re rounding the corner with inflation and interest rate hikes,” Tuj said. “Stocks can do well in that environment, especially the large growth stocks that drive the market.”

Financial markets have priced in a 99.9% chance of a 25 basis point increase in the Fed funds target rate at the conclusion of its 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) rose 47.2 points, or 1.19%, to 4,019.81 and the Nasdaq Composite (.IXIC) added 223.98 points, or . 2.01%, to 11,364.41.

Among the 11 major S&P 500 sectors, all except energy (.SPNY) ended in the green, with tech stocks (.SPLRCT) posting the biggest percentage gain of 2.3% in the session.

Fourth quarter reporting season has moved along quickly, with 57 companies in the S&P 500 posting results. According to Refinitiv, 63% of them outperformed expectations.

Analysts now see the S&P 500’s fourth-quarter earnings overall falling 3% year-over-year, nearly double the 1.6% annual decline seen at the start of the year, per Refinitiv.

Inc (DOW) this week, along with heavyweights including Microsoft Corp (MSFT.O) and Tesla Inc , Boeing CO (BA.N), 3M Co (MMM.N), Union Pacific Corp (UNP.N), Dow .N) and Northrop Grumman Corp (NOC.N) are expected to report quarterly results.

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

Tesla surged 7.7% in its fraud lawsuit related to a tweet by Chief Executive Elon Musk saying he supported taking the electric automaker private.

Baker Hughes Co (BKR.O) missed quarterly profit estimates due to inflationary pressures and ongoing disruptions caused by Russia’s war on Ukraine. Shares of Oilfield Services Co. declined 1.5%.

Cloud-based software firm Salesforce Inc (CRM.N) jumped 3.1% after news that activist investor Elliott Management Corp had taken a multibillion-dollar stake in the company.

Spotify Technology SA (SPOT.N) joins a growing list of tech-related companies to announce impending job cuts, shedding 6% of its workforce as rising interest rates and the growing prospect of a recession stifle growth. The pressure on the shares continued. Shares of the music streaming company rose 2.1%.

On the economic front, the US Commerce Department is expected to take its preliminary “advance” 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 consumer spending, income growth and importantly, inflation.

Advancing issues declined in the ratio of 2.77-to-1 on the NYSE; On the Nasdaq, the 1.73-to-1 ratio was in favor of advancers.

The 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 stood at 11.99 billion shares, compared to an average of 10.62 billion over the past 20 trading days.

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

Our Standards: The Thomson Reuters Trust Principles.

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