US stocks closed mixed on Monday after failing to maintain the momentum of the first big rally of the year last week.
Technology led the way higher, with the Nasdaq Composite (^IXIC) rising 0.6%, an outlier for the session, though well below the more than 2% rise the index saw before trading. The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) were each lower at close, falling 0.1% and 0.3%, respectively, after paring gains on the day.
The US dollar continued its slide, while the price of oil rose at the start of the week on optimism around demand as China reopens. West Texas Intermediate (WTI) crude futures, the US benchmark, rose 1.4% on Monday to trade just below $75 a barrel.
Atlanta Federal Reserve Chairman Raphael Bostic said in remarks at the Rotary Club of Atlanta on Monday that the US central bank should raise interest rates above 5% early in the second quarter and then keep them there for a “long time”.
“I’m not a pivot guy,” he said. “I think we should pause and hold there, and let the politics work.”
Some of the biggest losers of 2022 led Monday’s momentum higher. Megacaps including Apple (AAPL), Amazon (AMZN) and Alphabet (GOOG, GOOGL) closed higher.
Tesla (TSLA) was also among the top movers for the day, rallying nearly 6%. Coinbase Defeating Stock (COIN) rose 15.1%. Cathie Wood’s ARK Innovation ETF (ARKK), a gauge of speculative tech stocks and a big holder of each of the two names mentioned above, rose 4.6%.
Retail stocks were also in the spotlight on Monday, with several companies announcing news ahead of this week’s key ICR Conference.
Lululemon (LULU) warned that it expects fourth-quarter gross margins to decline as the company struggled with higher costs due to an inflation-related slowdown in consumer spending. Shares fell 9.3%.
On Friday night, Macy’s (M) also warned of growing sales and shares fell 7.6% on Monday. Abercrombie & Fitch (ANF), by contrast, said the drop in its sales was likely to be less than feared, sending shares up 8.8%.
Meanwhile, Bed Bath & Beyond (BBBY) shares soared 23.7% in volatile trading (at one point as high as 75%) after losing nearly half their value last week when the beleaguered meme stock retailer said it was bankrupt. table. Bed Bath & Beyond is set to report earnings on Tuesday.
Alibaba (BABA) shares rose about 3.2% on Monday, rising for the sixth day in a row, after co-founder Jack Ma agreed to cede controlling rights to fintech subsidiary Ant Group.
Investors await the December consumer price index (CPI) to be released on Thursday, possibly the most important economic release of the month and the last significant reading before Federal Reserve officials meet Jan. 31-Jan. February. 1 to deliver your next interest rate increase. Wall Street will also face the first batch of earnings of the upcoming reporting season from Wall Street’s megabanks at the end of the week.
All three major US indices soared on Friday, buoyed by signs of cooling wage growth in the latest monthly employment report. The S&P 500, the Dow Jones and the Nasdaq rose at least 2% in the previous session. For the week, the S&P 500 and Dow Jones Industrial Average each advanced about 1.5%, while the Nasdaq rose 1%.
Nonfarm payrolls increased by 223,000 in December, as the unemployment rate fell to 3.5%. The figures show a persistent imbalance between labor supply and demand, but investors hailed the easing of wage pressures as a sign the Fed may reconsider its ambitious rate hike path.
“Without question, the labor market has been able to withstand prolonged rate increases better than many expected,” Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Office of Global Investments, said in emailed comments. . “Remember, however, that monetary policy is lagging, so a slowdown in hiring is likely.”
“The Fed minutes made it clear that rates will remain high throughout 2023, so investors should prepare for a bumpy ride, especially as we enter earnings season and glimpse guidance in the coming weeks.” weeks”.
Monday also officially kicks off the first week of Q4 earnings season, with JPMorgan (JPM), the largest US consumer bank, paving the way for what will be a more benign than usual period. for corporate finance, as companies deal with the pressures of inflation and higher interest rates.
Wall Street analysts have been steadily cutting earnings estimates for S&P 500 companies through the final months of 2022.
Over the past quarter, analysts cut their EPS forecasts by an above-average margin of 6.5% from September 30 to December 31, according to data from FactSet Research. By comparison, the average downward revision of upward EPS estimates during a quarter was 2.5% over the past five years, 3.3% over the past 10 years, and 3.8% over the past 20 years. years, according to FactSet.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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