U.S. stocks closed mixed on Monday after failing to sustain momentum from last week’s first major rally of the year.
Technology led the way higher, with the Nasdaq Composite ( ^IXIC ) up 0.6%, a session-wide drift, though well below the more than 2% climb the index saw earlier in trade. The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) turned lower to close, falling 0.1% and 0.3%, respectively, after paring gains for the day.
The US dollar continued its slide while oil prices rose to start the week on optimism around demand as China reopens. West Texas Intermediate (WTI) crude futures, the US benchmark, rose 1.4% on Monday, trading just below $75 a barrel.
Atlanta Federal Reserve President Raphael Bostick said in remarks at the Rotary Club of Atlanta on Monday that the U.S. central bank should raise interest rates above 5 percent by the start of the second quarter and then keep them there for “a long time.”
“I’m not a mainstream person,” he said. “I think we need to pause and hang in there and let the politics work.”
Some of 2022’s biggest losers led Monday’s rally. Megacaps including Apple ( AAPL ), Amazon ( AMZN ) and Alphabet ( GOOG , GOOGL ) closed higher.
Tesla ( TSLA ) was also among the day’s biggest movers, up nearly 6%. Beaten shares of Coinbase ( COIN ) jumped 15.1%. Cathie Wood’s ARK Innovation ETF ( ARKK ) — a leader in speculative technology stocks and a large holder of each of the two aforementioned names — rose 4.6%.
Retail stocks were also in focus on Monday, with several companies announcing news ahead of this week’s key ICR conference.
Lululemon ( LULU ) warned that it expects fourth-quarter gross profit to decline as the company grapples with increased costs due to an inflation-related slowdown in consumer spending. Shares fell 9.3%.
Late Friday, Macy’s ( M ) also warned about sales growth, and shares fell 7.6% on Monday. Abercrombie & Fitch ( ANF ), on the other hand, said its sales decline was likely to be smaller than expected, sending its shares up 8.8%.
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Bed Bath & Beyond ( BBBY ) shares, meanwhile, jumped 23.7% in choppy trading — at one point up as much as 75% — after losing nearly half of their value last week when the embattled meme retailer said that the table is bankrupt. Bed Bath & Beyond is scheduled to report earnings on Tuesday.
Shares of Alibaba ( BABA ) rose about 3.2% on Monday, rising for a sixth straight day after co-founder Jack Ma agreed to relinquish controlling rights to fintech affiliate Ant Group.
Investors await the December consumer price index (CPI) due on Thursday – perhaps the most important economic announcement of the month and the last significant reading before the Federal Reserve staff meeting from Jan. 31-Feb. 1 to secure their next rate hike. 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 U.S. indexes rose on Friday, boosted by signs of slowing wage growth in the latest monthly jobs report. The S&P 500, Dow and Nasdaq rose at least 2% in the previous session. For the week, the S&P 500 and Dow Jones Industrial Average advanced roughly 1.5%, while the Nasdaq rose 1%.
Nonfarm payrolls rose by 223,000 in December as the unemployment rate fell to 3.5%. The figures showed a continuing imbalance between labor supply and demand, but investors welcomed the easing of wage pressures as a sign that the Fed may be revising its ambitious rate hike.
“Without a doubt, the labor market has weathered prolonged interest rate hikes better than many expected,” Mike Lowengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office, said in emailed comments. “Remember, though, that monetary policy acts with a lag, so it’s likely a matter of if, not when, to slow hiring.”
“The Fed’s minutes have made it clear that rates will remain high throughout 2023, so investors should brace themselves for a bumpy ride, especially as we head into earnings season and get a glimpse of guidance in the coming weeks.”
Traders work on the New York Stock Exchange (NYSE) in New York, U.S., January 5, 2023. REUTERS/Andrew Kelly
Monday also officially kicks off the first week of fourth-quarter earnings season, with JPMorgan ( JPM ) , the largest U.S. consumer bank, paving the way for what is expected to be a softer-than-usual period for corporate finance as as companies struggle with pressures from inflation and higher interest rates.
Wall Street analysts have consistently cut earnings forecasts for S&P 500 companies in the final months of 2022.
In the most recent quarter, analysts lowered their EPS estimates by a larger-than-average margin of 6.5% from Sept. 30 to Dec. 31, according to data from FactSet Research. By comparison, the average downward revision of one-quarter EPS estimates has been 2.5% over the past five years, 3.3% over the past 10 years and 3.8% over the past 20 years, according to FactSet.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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