NEW YORK: US stocks rose on Monday as investors hunted for bargains after the main benchmarks logged their biggest percentage declines of the year on worries about the impact of a tighter monetary policy.
The blue-chip Dow erased its gains for the year in Friday’s selloff and the benchmark S&P 500 posted its third straight week of losses on fears that a strong economy and high inflation will give the Fed more room to raise rates.
The three main indexes climbed about 1% after the opening bell on Monday but gave up some gains by afternoon as defensive sectors such as utilities and consumer staples stocks fell.
Growth stocks rebounded, with Tesla up 4.1% after the electric automaker said its plant in Brandenburg near Berlin was producing 4,000 cars a week, three weeks ahead of schedule according to a recent production plan reviewed by Reuters.
“Some relatively significant losses last week is the starting point,” said Art Hogan, chief market strategist at B Riley Wealth.
“Also, when you look at the drivers last week, better-than-expected economic data pushed yields higher. As we enter the new week, we see that the yields are calming down a bit.” The yield on two-year Treasury notes, the most sensitive to short-term rate expectations, slipped after touching a near four-month high earlier.
Traders raised their bets of a 50-basis-point (bps) hike in March after data last week showed the Personal Consumption Expenditures price index, the metric by which the Fed measures its 2% inflation target, rose 5.4% last month.
Fed fund futures show traders are pricing in a third 25 bps hikes this year and see rates peaking at 5.4% by September.
Morgan Stanley said it expects the Fed to cut rates by March 2024, farther from its previous forecast of December 2023, saying it now expects “a slower pace” of rate cuts.
Meanwhile, Fed Governor Philip Jefferson said he had “no illusion” that inflation would quickly fall back to target and was committed to keeping restrictive monetary policy in place for as long as needed to make sure price stability is restored.
At 12:11 p.m. ET, the Dow Jones Industrial Average was up 39.05 points, or 0.12%, at 32,855.97, the S&P 500 was up 13.31 points, or 0.34%, at 3,983.35, and the Nasdaq Composite was up 76.52 points, or 0.67%, at 11,471.46.
Data earlier showed new orders for key US-made capital goods increased more than expected in January while shipments of the so-called core goods rebounded, suggesting that business spending on equipment picked up at the start of the first quarter.
Seagen Inc surged 10.5% after the Wall Street Journal reported that Pfizer was in early talks to acquire the biotech firm. Pfizer’s shares slipped 1.1%. `US railroad operator Union Pacific jumped 9.5% as Chief Executive Lance Fritz said he would step down, a move that follows calls from hedge fund Soroban Capital Partners for his ouster.
Fisker Inc soared 29% after the EV maker reported increased orders for its sports utility vehicle Ocean and maintained its production forecast for the year. Advancing issues outnumbered decliners by a 2.33-to-1 ratio on the NYSE and 1.75-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and three new lows, while the Nasdaq recorded 51 new highs and 64 new lows.
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