U.S. stocks edge higher, attempt bounce after worst week of 2023


U.S. stocks were off session highs but holding on to gains on Monday, attempting a bounce after shifting rate expectations triggered Wall Street’s worst week of 2023.

How stocks are trading
  • The Dow Jones Industrial Average
    was up 146 points, or almost 0.5%, at 32,965.

  • The S&P 500
    advanced 24 points, or 0.6%, to 3,994.

  • The Nasdaq
    gained 108 points, or 1%, to trade at 11,503.

Stock indexes booked their biggest losses of 2023 last week. The Dow dropped 3% for its biggest weekly decline since the week that ended Sept. 23. The S&P 500 retreated 2.7% for its third straight weekly fall and the Nasdaq fell 3.3%. The S&P 500 and Nasdaq saw their biggest weekly declines since the week that ended Dec. 9.

What’s driving markets

Stocks were attempting to gain back some of the ground lost last week, when equities fell amid further signs that relatively robust economic activity is helping keep inflation stubbornly high.

The PCE inflation measure released on Friday showed price pressures remain elevated, reducing the chances that the Federal Reserve will consider easing monetary policy anytime soon and thus forcing bond yields higher.

Despite such data, many investors were brushing aside the report. Jay Hatfield, chief executive of Infrastructure Capital Advisors in New York and portfolio manager of the InfraCap Equity Income ETF
said he thinks the PCE and U.S. consumer-price index are “overstating inflation.” In particular, he said, PCE contains a number of volatile components such as transportation services “which can reverse month to month and show significant declines.”

“We do not believe that the Fed will double down on rate hikes and do 50bp at the next meeting,” Hatfield wrote in an email to MarketWatch. “We continue to believe that the Fed is far too bearish about inflation.”

Fed Gov. Philip Jefferson said on Monday that he doesn’t support raising the central bank’s 2% inflation target because it “would damage the central bank’s credibility.”

In other developments on Monday, U.S. durable-goods orders fell 4.5% in January. Excluding transportation, sales were up 0.7%.

Read: Durable-goods orders sink 4.5% — but it’s all Boeing. Overall, report signals that the economy is still growing.

A modest pullback in Treasury yields following that data was “all stocks needed to break the strong downtrend they had been in,” said Louis Navellier, founder of Navellier & Associates, in a note.

Meanwhile, U.S. pending home sales rose 8.1% in January, according to the monthly index released on Monday by the National Association of Realtors, with sales rising for the second month in a row. The last time pending home sales rose by this much in June 2020, fueled by pandemic buying. Analysts polled by The Wall Street Journal had forecast the pending home sales index would rise by 0.9%.

The S&P 500 has lost 4% over the past three weeks as the monetary-policy-sensitive 2-year Treasury yield
moved above 4.8% to the highest level since July 2007. However, yields were a touch softer on Monday, helping to improvement sentiment toward stocks as the week begins.

See: The 2023 stock market rally looks wobbly. What’s next as investors prepare for longer inflation fight.

Still, economists at JPMorgan Chase & Co. are warning about the rising risk of “a more wrathful Old-Testament style” reaction to rate hikes from developed-market central banks, following a “gentle and forgiving path” to rein in inflation. And Jonathan Krinsky, chief technical strategist at BTIG, is wary of further downside for stocks.

Source: BTIG

“While it was holiday shortened, the [S&P 500] suffered its worst decline of the year last week (-2.67%) as momentum continues to rollover. As a result, it essentially tested its 200 day moving average (3940) and got down to the high volume zone (3925-3950) of the last few years. While these areas are likely to provide some support in the near-term, we expect an eventual breakdown below which would open the door to Dec. lows (3775),” Krinsky wrote in a note to clients.

Companies in focus
  • Shares of Seagen Inc.
    rose 9.6% after The Wall Street Journal reported Pfizer Inc.
    was in talks to buy the cancer-therapies biotech for a premium to its $30 billion market cap. Pfizer’s stock fell 1.6%.

  • Union Pacific Corp.
    shares were up 8.4% after the railroad agreed to oust its chief executive just hours after a New York hedge fund urged it to do so.

Movers & Shakers: Seagen’s stock soars on reported Pfizer buyout interest; Union Pacific shares rally after CEO ouster

— Jamie Chisholm contributed to this article.




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