The Nasdaq Composite led stocks higher Monday, building on a bounce from late last week as investors awaited a stream of corporate results and weighed the outlook for Federal Reserve rate hikes and the prospects for an economic soft landing.
How stocks are trading
- The Dow Jones Industrial Average rose 292 points, or 0.9%, to 33,668.
- The S&P 500 was up 54 points, or 1.4%, at 4,027.
- The Nasdaq Composite advanced 228 points, or 2.1%, to 11,368.
Stocks rose sharply on Friday, but the Dow and S&P 500 suffered weekly losses. The Dow slumped 2.7%, while the S&P 500 shed 0.7%. The Nasdaq Composite advanced 0.6% for the week after surging 2.7% on Friday.
Wall Street picked up Monday where it left off last week.
“Markets finished the week strongly, with the beaten down Nasdaq continuing to show signs of new year promise. After a [bad] 2022 in which the rising interest rate environment sucked much of the life from growth stocks, there has been some bargain hunting from investors who wonder whether there has been an overshoot of depressed valuations,” said Richard Hunter, head of markets at Interactive Investor.
U.S.-listed shares of audio-streaming service Spotify Technology SA SPOT rose 3.1% Monday after it announced layoffs, contributing to the wave of job cuts sweeping the tech industry. Tech-related shares were lifted last week amid a continued stream of job cuts from megacap companies, including Amazon.com Inc. and Google parent Alphabet Inc.
The stock market’s recent vacillations reflect how traders daily shift the emphasis they afford the market’s current main drivers; fears of an economic slowdown; how much the Federal Reserve will continue to raise interest rates given inflation levels and evidence of any slowdown; and the impact these factors will have on corporate earnings.
The Fed is now in its blackout period ahead of its next decision on interest rates, due Feb. 1, so traders will have no monetary policy chatter on which to make bets. Consequently, the continuing earnings season will likely carry greater heft for now.
“The strength of the global economy is a big question this week and next as industrials and technology companies gear up to report earnings. With greater exposure to international markets, their performance will be a good guidepost for how the global economy is doing compared to the U.S.,” said Mark Hackett, chief of investment research at Nationwide, in a note.
“We can expect to still see healthy earnings from these companies, despite recent layoffs,” he said.
Monday’s earnings roster was light. But picks up over the next few days as the likes of General Electric Co. Johnson & Johnson Microsoft Corp. Tesla Inc. Verizon Communications Inc. International Business Machines Corp. and Intel Corp. deliver updates.
For the week ahead, 93 companies in the S&P 500 index and 12 of the 30 Dow Jones Industrial Average components, are set to report quarterly results.
Earnings Watch: Microsoft, Tesla and Intel are about to face the doubters
The earnings season so far has been a mixed bag. Tajinder Dhillon, analyst at Refinitiv, said 63.6% of companies so far have beaten earnings estimates, compared with the long-term average of 66.3%, and the prior four quarter average of 75.5%.
Many bourses in Asia, notably Hong Kong and Shanghai, were closed for the Lunar New Year, but elsewhere the tone was upbeat, with Japan’s Nikkei 225 gaining 1.3%.
“Investor confidence has surged into the Lunar New Year after China lifted its drastic COVID restrictions and hopes have risen that the end to interest rate hikes may finally be in sight while there have been signs economies may prove more resilient in the downturn,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
The U.S. leading economic index sank 1% in December and flashed even stronger signals that a recession is likely soon. Economists polled by The Wall Street Journal had forecast a 0.7% decline.
The LEI is a gauge of 10 indicators designed to show whether the economy is getting better or worse. The report is published by the nonprofit Conference Board.
Companies in focus
- Activist investor Elliott Management Corp. has made a multibillion-dollar investment in Salesforce Inc. CRM, The Wall Street Journal reported Monday, citing people familiar with the matter. Shares of the Dow component rose 3.4%.
- Shares of Evoqua Water Technologies Corp. surged 13.7%, after the water and wastewater treatment company agreed to be acquired by Xylem Inc. in an all-stock deal valued at $7.5 billion. Xylem’s stock tumbled 9.2%.
- Baker Hughes Co. shares edged down 0.2% after the oil-field-services company fell short of expectations with its latest revenue and earnings numbers but said it had record orders of $8 billion for the fourth quarter.