Wall Street extends rally fueled by tech jump

  • Baker Hughes misses Q4 earnings estimates
  • Activist investor Elliott Management buys stake in Salesforce
  • As Barclay improves, the chips increase
  • Indexes rose: Dow 0.76%, S&P 1.19%, Nasdaq 2.01%

NEW YORK, Jan 23 (Reuters) – Wall Street closed sharply lower on Monday as investors resumed enthusiasm for the bullish stocks that led a market that was battered last year.

All three major stock indexes extended gains on Friday, led by the tech-heavy Nasdaq pack, boosted by semiconductor stocks (.SOX).

“(The chips) are a depressed bunch, so I’m not too surprised,” said Peter Tuz, president of Chase Investment Advisors in Charlottesville, Virginia. “We will see earnings from these companies over the next few weeks, and that will be where the rubber meets the road.”

“This is a group ripe for a rebound.”

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

Investors are confident the Federal Reserve will make a modest rate hike next week, even as the U.S. central bank remains committed to taming the hottest inflation cycle in decades.

“(Investors) are pretty comfortable that they will see lower interest rate hikes from the Fed, that we’ve rounded the corner on inflation and interest rate hikes,” Tuz added. “Equities, especially the large growth stocks that drive the market, can do well in this environment.”

According to CME’s FedWatch tool, financial markets have priced in a 99.9% chance that the Fed will raise its target funds rate by 25 basis points at the end of next Wednesday’s two-day monetary policy meeting.

The Dow Jones Industrial Average (.DJI) added 254.07 points, or 0.76%, to 33,629.56, the S&P 500 (.SPX) added 47.2 points, or 1.19%, to 4,019.81 and the Nasdaq Composite (. up 2.01% to 11,364.41.

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

The fourth-quarter reporting season kicked into overdrive, with 57 companies in the S&P 500 posting results. According to Refinitiv, 63% of them had better-than-expected earnings.

Analysts now see the S&P 500’s fourth-quarter earnings falling sharply to 3% year-over-year, nearly doubling from the 1.6% year-over-year decline seen earlier in the year, according to Refinitiv.

This week, hard-hit industries including Microsoft Corp ( MSFT.O ) and Tesla Inc, 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 post quarterly results.

The Philadelphia SE semiconductor index (.SOX) rose 5.0%, its biggest one-day gain since Nov. 30, after Barclays upgraded the sector to “overweight” from “equal weight.”

Tesla rose 7.7% after Chief Executive Elon Musk took the stand in a fraud lawsuit over a tweet in which he said he supported taking the electric car maker private.

Baker Hughes Co ( BKR.O ) missed quarterly profit estimates due to inflationary pressures and ongoing disruptions from Russia’s war against Ukraine. Shares of the oilfield services company fell 1.5%.

Cloud-based software firm Salesforce Inc ( CRM.N ) rose 3.1% after news activist investor Elliot Management Corp bought a multibillion-dollar stake in the company.

Spotify Technology SA ( SPOT.N ) has joined a growing list of tech-related companies to announce pending job cuts as rising interest rates and the prospect of a looming recession continue to pressure growth stocks. Shares of the music streaming company rose 2.1%.

On the economic front, the US Commerce Department is expected to release a preliminary “advance” estimate of fourth-quarter GDP on Thursday, which analysts expect will be 2.5%.

Friday’s comprehensive personal consumption expenditures (PCE) report is expected to shed light on consumer spending, income growth and, most importantly, inflation.

Advancing issues outnumbered declining issues on the NYSE by a ratio of 2.77 to 1; A 1.73-to-1 ratio on the Nasdaq favored the 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.

In the US, the volume of the stock was 11.99 billion shares, compared to an average of 10.62 billion shares in the last 20 trading days.

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

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