US stocks rose on Monday, extending last week’s gains after the first major rally of 2023 last week.
The S&P 500 (^GSPC) rose 1.3%, while the Dow Jones Industrial Average (^DJI) rose 270 points, or 0.8%. The tech-heavy Nasdaq Composite (^IXIC) was up 2.1%.
The US dollar continued a recent slump as oil prices rallied early in the week on demand optimism as China reopens. West Texas Intermediate (WTI) crude oil futures, the US benchmark, rose almost 3% Monday morning and traded just below $76 a barrel.
Retail stocks were also in the spotlight early Monday, with several companies announcing news ahead of the main ICR conference this week.
Lululemon (LULU) warned that it expects gross margins to decline in the fourth quarter as the company struggled with higher costs due to an inflation-related slowdown in consumer spending. The stock fell by 8.5%.
Late Friday night, Macy’s (M) also warned of sales growth, and shares fell 7% at the start of Monday’s session. In contrast, Abercrombie & Fitch (ANF) said the drop in sales is likely to be less than feared, sending shares up about 9%.
Shares of Bed Bath & Beyond (BBBY), meanwhile, rose 38% in volatile trading — as much as 75% higher at one point — after losing nearly half of their value last week when the embattled meme-stock seller said that the bankruptcy in progress was the table. Bed Bath & Beyond will announce the results on Tuesday.
Shares of Alibaba (BABA) rose about 3.6% on Monday, up for a sixth straight day after co-founder Jack Ma agreed to relinquish controlling rights to fintech subsidiary Ant Group.
Investors await December’s consumer price index (CPI) expected Thursday — arguably the most important economic release of the month and the last major reading before Federal Reserve officials meet on January 31 and February. 1 to achieve their next rate hike. Wall Street will also face the first wave of earnings of the upcoming reporting season from Wall Street’s mega banks at the end of the week.
All three major US indices rose on Friday, propelled by signs of slowing wage growth in the latest monthly jobs report. The S&P 500, Dow and Nasdaq were all up at least 2% in the previous session. For the week, the S&P 500 and the Dow Jones Industrial Average were each up about 1.5%, while the tech-heavy Nasdaq Composite was up 1%.
Nonfarm payrolls rose by 223,000 in December while the unemployment rate fell to 3.5%. The numbers show a lingering imbalance between labor supply and demand, but investors hailed easing wage pressures as a sign that the Fed could reconsider its ambitious rate hike trajectory.
“No doubt the labor market has weathered prolonged rate hikes better than many expected,” Mike Loewengart, head of model portfolio construction at Morgan Stanley’s Global Investment Office, said in an emailed comment. “However, remember that monetary policy works with a lag, so it’s probably an if and not a when for a slowdown in hiring.”
“The Fed’s minutes made it clear that rates will remain high throughout 2023, so investors should prepare for a bumpy ride, especially as we enter earnings season and glimpse the outlook in the weeks to come.”
Monday also officially kicks off the first week of fourth-quarter earnings season, with JPMorgan (JPM), the largest consumer bank in the U.S., paving the way for what will be a milder-than-usual period for financial firms as companies grapple with the pressure of inflation and higher interest rates.
Wall Street analysts have been steadily lowering earnings estimates for S&P 500 companies in the final months of 2022.
In the past quarter, analysts cut their earnings-per-share forecasts by an above-average margin of 6.5% from Sept. 30 to Dec. 31, according to data from FactSet Research. By comparison, the average downward revision of bottom-up EPS estimates over a quarter was 2.5% over the past five years, 3.3% over the past 10 years, and 3.8% over the past 20 years, per FactSet .
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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