4:05pm: 2-year Treasury yield hits highest level since 2007
The Dow closed Monday up 72 points, 0.2%, to 32,889, the Nasdaq Composite added 72 points, 0.6%, to 11,467 and the S&P 500 improved 12 points, 0.3%, to 3,982. The small-cap Russell 2000 rose 4 points, 0.2%, to 1,894.
The indexes all closed higher after the worst week for the benchmarks thus far in 2023.
Investors are keeping a close eye on Treasury yield. The 2-year rate hit 4.883%, its highest level since 2007, before lowering slightly to 4.782%.
“Because of the renewed focus on hotter inflation and the implications for the Fed, rates are once again driving equities,” said Ross Mayfield, investment strategy analyst at Baird, per CNBC. “The rapid shift in Fed funds expectations and the spike in short-term yields has been risk-off in the stock market, so some reprieve on rates today will likely boost equities.”
12:05pm: Consumer spending and home sales data provide glimmer of hope
US stocks were higher in noon trading after the Commerce Department reported that consumer spending rose 1.8% last month from December, the largest increase in nearly two years, while pending home sales climbed by a better than expected 8.1% in January.
At midday, the Dow gained 69 points to 32,886, while the S&P 500 added 18 points at 3,988 and the tech-heavy Nasdaq moved up 95 points to 11,490.
“A holiday-shortened week was more than enough time for bears to remind everyone that January’s rally didn’t mean stock-market volatility had been permanently exiled,” E-Trade head of trading and investing Chris Larkin said.
“Investors are coming to grips with rates being higher for longer and Friday’s hotter-than-anticipated inflation data effectively confirmed just that,” he added.
Notable movers included shares of Seagen Inc, which climbed more than 10% after the Wall Street Journal reported that Pfizer Inc is in talks to buy the cancer drug maker in a deal that is expected to be valued at just over $30 billion.
9:40am: Stocks open higher after last week’s selloff
US stocks moved higher at open on Monday after steep losses last week, with investors eyeing results from retailers such as Costco, Macy’s, Dollar Tree, and Kohl’s that are set to round out the 4Q earnings season.
Just after the market opened, the Dow Jones Industrial Average had added 224 points or 0.7% at 33,041 points, the S&P 500 was up 32 points or 0.8% at 4,002 points, and the Nasdaq Composite had gained 115 points or 1% at 11,509 points.
On the data front, new orders for manufactured goods fell more than expected to 4.5% in January, below the consensus expectation of 4% and after a downwardly revised 5.1% in December.
Orders excluding transportation rose 0.7%, above the consensus of 0.1%, and core capital goods orders rose 0.8%, also above the consensus of 0.0%.
Pantheon Macroeconomics chief economist Ian Shepherdson noted that the core gains were likely due to favorable weather and they would not persist, with reversion likely to be spread across February and March.
“Headline orders were depressed by a steep drop in orders for civilian aircraft, reversing the December jump, and clearly signalled by Boeing’s orders data,” he said.
“The increase in orders ex-transportation was the biggest since March last year but it follows a 0.4% decline in December and, like most of the other activity data for January, it likely was boosted by the much warmer-than-usual weather.”
He noted the same story applied to the bounce in core capital goods. “The underlying trend in nominal orders is flat-to-slightly downwards but real orders clearly are falling; January’s increase does not change the trends,” Shepherdson said.
“Surveys suggest further declines are coming, though the rebound in China’s manufacturing numbers means that the US ISM and regional manufacturing surveys ought to see a modest uptick over the next few months.”
6:30am: Positive start to the week expected
Wall Street is set to open higher following a tough week for US equities after hotter-than-expected inflation data increased expectations that the Federal Reserve will continue raising interest rates for longer than previously hoped.
Futures for the Dow Jones Industrial Average (DJIA) rose 0.4% in Monday pre-market trading, while those for the broader S&P 500 index gained 0.5%, and contracts for the Nasdaq-100 also added 0.5%.
Markets finished lower on Friday after the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, increased 0.6% in January and 5.4% for the past 12 months, above the consensus expectation of an annualized increase of 4.9% and up from December’s annualized reading of 5%.
The DJIA ended 1% lower at 32,817 on Friday, enduring its fourth losing week in a row, while the Nasdaq Composite dropped 1.7% to 11,395 and the S&P 500 fell 1.1% to 3,970. The small-cap Russell 2000 index declined 1.3% to 1,884.
“A slew of better-than-forecast US data recently has caused a shift in the market’s expectations regarding Fed policy,” commented TickMill Group market analyst James Harte. “These better data points, along with a fresh uptick in inflation, have fuelled an increase in pricing for a larger 0.5% hike in March along with the view that the Fed will push ahead with tightening for longer than initially expected this year."
"Looking ahead this week, there will be more US data releases and Fed speakers to keep an eye on kicking off with durable goods and Fed’s Jefferson today," Harte added.
With the fourth-quarter 2022 earnings season drawing to a close, Harte highlighted results from Zoom Video Communications today. The company is due to report against Wall Street forecasts of EPS of $0.81 on revenues of $1.1 billion.
“However, there has been some market chatter regarding the potential for a negative EPS which, if seen, would be a heavy blow for the company and likely see shares come off sharply today,” he said. “Given the weak expectations, however, any surprise upside today will be strongly bullish for the stock.”
Also reporting this week are retailers Target and Dollar Tree, home improvement group Lowe and drinks group Monster Beverage.