Wall Street extends rally, powered by tech bounce

NEW YORK, Jan. 23 (Reuters) – Wall Street closed sharply higher on Monday, fueled by rising technology stocks as investors kicked off a week of earnings with renewed enthusiasm for market-leading momentum stocks that had been battered last year.

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

“(Chips are) a group that has been depressed, so I’m not too surprised,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “We’ll see revenue from these companies in the coming weeks and that’s going to be where the rubber meets the road.”

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

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

Investors are pretty sure the Federal Reserve will push through a bite-sized rate hike next week, even as the U.S. central bank remains determined to tame the hottest inflation cycle in decades.

“(Investors) are pretty comfortable that they’re going to see lower rate hikes from the Fed, that we’re right around the corner with inflation and rate hikes,” Tuz added. “Equities can do well in that environment, especially the big growth stocks that drive the market.”

Financial markets have priced in a 99.9% probability of a 25 basis point increase in the Fed Funds target rate by the end of Wednesday’s two-day monetary policy meeting, 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 S&P 500 sectors, everything but energy (.SPNY) finished green, with technology stocks (.SPLRCT) posting the largest percentage gains, up 2.3% during the session.

The fourth-quarter reporting season has gained momentum, with 57 of the companies in the S&P 500 reporting results. Of those, 63% have delivered better-than-expected revenues, according to Refinitiv.

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

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

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

Tesla rose 7.7% after Chief Executive Elon Musk took the stand on his fraud case related to a tweet saying he had support to take the electric automaker private.

Baker Hughes Co (BKR.O) missed quarterly earnings 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 company Salesforce Inc (CRM.N) rose 3.1% on news that activist investor Elliot Management Corp. has taken a multibillion-dollar stake in the company.

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

On the economic front, the U.S. Commerce Department is expected to release its first “advance” on fourth-quarter GDP on Thursday, which analysts expect will come in at 2.5%.

On Friday, the Comprehensive Personal Consumption Expenditure (PCE) report will shed light on consumer spending, income growth and, crucially, inflation.

Emerging issues outnumbered declining issues on the NYSE by a ratio of 2.77 to 1; on Nasdaq, a ratio of 1.73 to 1 was in favor of progress.

The S&P 500 posted 11 new highs in 52 weeks and no new lows; the Nasdaq Composite recorded 82 new highs and 19 new lows.

Volume on the US stock exchanges was 11.99 billion shares, compared to the 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 Edited by Marguerita Choy

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