The three main benchmarks all traded higher on Monday at the end of a volatile month for Wall Street with the tech-heavy Nasdaq flirting with its worst ever start to the year as investors dodged richly valued stocks with aggressive rate hikes on deck.
Valuations of growth and technology stocks have come under increasing scrutiny, with the Nasdaq declining 9.89% so far this month. Its worst January performance on record was 9.89% in 2008.
All of the 11 major S&P sectors advanced, led by a rise in consumer discretionary stocks, which jumped 2.9%. Despite these increases, only the energy sector was on track to end January in positive territory, aided by oil prices hitting their highest level since October 2014 on Friday.
"Today's and Friday's bounce is just some of the institutional guys saying Nasdaq was due for end of the month rebalancing," said Lindsey Bell, chief investment strategist at Ally Invest, in Charlotte, North Carolina.
"It is simply a little bit of a relief rally after such a sharp sell-off." Tesla Inc jumped 9.2% after Credit Suisse raised the electric car maker's stock rating to "outperform", while Netflix Inc surged 9.8% after Citigroup upgraded the streaming company's shares to "buy".
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The bellwether S&P 500 has fallen 5.9% so far this month and is on track for its worst month since the pandemic-led crash in March 2020.
"The January barometer, which states 'as goes January, so goes the year', will be negative, implying investors are in for a challenging year," Sam Stovall, chief investment strategist at CFRA Research, said.
The U.S. Federal Reserve last week signaled it intends to combat the four-decade high inflation by hiking key interest rates more aggressively than many market participants expected.
Fed funds futures traders are pricing in almost five rate increases by year-end, with some banks, such as the Bank of America now eyeing seven hikes this year.
Geopolitical tensions have added to market uncertainty, with the U.S. and its allies threatening Russia with new economic sanctions if it attacks Ukraine.
By 1:49 p.m. ET, the Dow Jones Industrial Average rose 196.91 points, or 0.57%, to 34,922.38, the S&P 500 gained 53.13 points, or 1.20%, to 4,484.98 and the Nasdaq Composite added 330.67 points, or 2.4%, to 14,101.24.
Bank stocks rose 0.3% as a widely watched section of the U.S. Treasury yield curve, an indicator of economic expectations, flattened to its lowest levels since October 2020.
The fourth-quarter earnings season continues with megacaps such as Google parent Alphabet Inc, Amazon Inc and Meta Platforms Inc expected to report later this week, following strong results from Apple Inc and Microsoft Corp this month.
As of Friday, a third of S&P 500 companies have posted earnings, and 77.4% of them reported above analyst expectations, according to Refinitiv.
Spotify Technology rose 11.6% after Citigroup upgraded the music streaming company's stock to "buy".
Citrix Systems Inc's shares fell 3.7% after the software company said it had agreed to be taken private for $16.5 billion including debt by affiliates of Elliott Management and Vista Equity Partners.
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