Wall Street extends rally, propelled by tech rebound

  • Baker Hughes stumbles upon missing fourth-quarter earnings estimates
  • Activist investor Elliott Management takes stake in Salesforce
  • Tokens increase following Barclay 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, fueled by soaring tech stocks as investors kicked off a profit-rich week with renewed enthusiasm for dynamic market-leading stocks that have were beaten last year.

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

“(Fleas are) a bunch that got depressed, so I’m not too surprised,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Va. “We’re going to see earnings from these companies over the next two weeks and that’s where the rubber meets the road.”

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

The session marks a calm before the storm in a week filled with high-profile earnings reports and a back-end laden with crucial economic data.

Investors are almost certain that the Federal Reserve will implement a small interest rate hike next week, even as the US central bank remains determined to rein in the hottest inflationary cycle in decades.

“(Investors) are pretty confident that they’re going to see lower rate hikes from the Fed, that we’re rounding the corner on inflation and interest rate hikes,” Tuz added. “Equities can do well in this environment, especially the big growth stocks that are driving the market.”

Financial markets have priced a 99.9% chance of a 25 basis point hike in the federal funds target rate following 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) gained 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.

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

The fourth quarter reporting season gathered pace, with 57 of the S&P 500 companies reporting results. Of these, 63% generated earnings above expectations, according to Refinitiv.

Analysts now see fourth-quarter earnings for the S&P 500, in total, falling 3% year-on-year, nearly twice as much as the 1.6% annual decline seen at the start of the year, according to Refinitiv.

This week, Microsoft Corp (MSFT.O) and Tesla Inc, along with a wave of heavy 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 report quarterly results.

The Philadelphia SE Semiconductor Index (.SOX) jumped 5.0%, its biggest one-day gain since Nov. 1. 30 after Barclays moved the sector from “overweight” to “equal weight”.

Tesla jumped 7.7% after chief executive Elon Musk spoke out in his fraud lawsuit over a tweet saying he supported privatizing the electric carmaker.

Baker Hughes Co (BKR.O) missed quarterly earnings estimates due to inflationary pressures and continued disruption from Russia’s war on Ukraine. Shares of the oil services company fell 1.5%.

Cloud-based software company Salesforce Inc (CRM.N) jumped 3.1% following news that activist investor Elliot Management Corp has taken a multi-billion dollar stake in the company.

Spotify Technology SA (SPOT.N) has joined the growing list of tech-related companies to announce impending job cuts, laying off 6% of its workforce as rising interest rates and the looming possibility of a recession continue to put pressure on growth stocks. Shares of the music streaming company rose 2.1%.

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

On Friday, the extensive Personal Consumption Expenditure (PCE) report is expected to shed some light on consumer spending, income growth and, most importantly, inflation.

Advancing issues outnumbered declining ones on the NYSE by a ratio of 2.77 to 1; on the Nasdaq, a ratio of 1.73 to 1 favored 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 U.S. exchanges was 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 Johann M Cherian in Bengaluru Editing by Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.

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