Bim
Wall Street’s major indices were on track to extend their rally to a second straight session on Monday, helped by gains in technology stocks. Investors also geared up for an earnings-heavy week that will see many major names report their quarterly results.
Into the last hour of trading, the three averages had come off their session highs but were set to end in the green.
The tech-heavy Nasdaq Composite (COMP.IND) was up 1.71% to 11,331.31 points. The benchmark S&P 500 (SP500) was 0.97% higher to 4,011.06 points, while the blue-chip Dow (DJI) added 0.56% to 33,563.06 points.
Of the 11 S&P sectors, nine were trading in the green, with heavyweight sectors Technology and Communication Services the top gainers.
All three indices have added to a solid rally on Friday. Market participants are on watch for a host of earnings releases this week from companies such as Johnson & Johnson (JNJ), Microsoft (MSFT), Boeing (BA), IBM (IBM), Tesla (TSLA), Visa (V) and Chevron (CVX). Meanwhile, the Federal Reserve will take a backseat this week as the monetary policy committee enters its blackout period ahead of its February meeting.
“We look for the Committee to hike rates by 25 bps on February 1, bringing the target range for the federal funds rate to 4.50%-4.75%,” Wells Fargo economist Jay Bryson and team wrote. “Fed policymakers appear to be entering the fine-tuning phase of this tightening cycle.”
“However, inflation remains too high for the Fed’s liking, and most FOMC members continue to state publicly that rates need to go higher to bring inflation back to the target of 2%. We look for the Committee to raise its target range for the federal funds rate by 25 bps at each of its meetings on February 1, March 22, and May 3. If realized, the target range would end the tightening cycle at 5.00%-5.25% in early May.”
The S&P 500 (SP500) on Friday posted its first weekly loss of the new year after solid gains over the first half of January, as economic data added to worries over a slowdown in growth.
“The recent weakening of economic data and anticipated decline in earnings expectations are pointing to markets that are likely to move lower, in our view,” JPMorgan’s Marko Kolanovic said in a research note.
“In the backdrop of these negative developments, markets have been resilient and, in many segments, moved significantly higher this year. Recent flows have been positive primarily driven by systematic inflows on account of declining volatility. In Europe, likely misplaced optimism caused trend-following programs to reverse positions from fully short to long. However, we think these drivers are running out of steam and recession is currently not priced in Equities,” Kolanovic added.
Rates were higher on Monday. The 10-year Treasury yield (US10Y) rose 4 basis point to 3.52%, while the 2-year yield (US2Y) rose 5 basis points to 4.23%.
Among active stocks, Dow (DJI) component Salesforce (CRM) advanced after a report that activist investor Elliott Management had taken a large stake in the company.
Chip stocks gained, led by AMD (AMD), Qualcomm (QCOM) and Seagate (STX) after the companies received a rating upgrade from Barclays.
Xylem (XYL) was the top percentage loser on the S&P 500 (SP500) after the company agreed to buy Evoqua Water (AQUA) in a ~$7.5B deal. Evoqua gained more than 12%.
