NEW YORK (AP) – U.S. stocks rose on Monday as Wall Street’s most powerful stocks began a week of showing whether the huge expectations heaped on them were justified.
The S&P 500 index rose 36.96 points, or 0.8%, to a new record of 4,927.93. The Dow Jones Industrial Average rose $224.02, or 0.6%, to $38,333.45, and the Nasdaq Composite Index rose $172.68, or 1.1%, to $15,628.04.
Big tech stocks are a key reason the S&P 500 has soared more than 35% since fall two years ago, a record high. A handful of seven stocks have been responsible for most of the index’s returns over this period, driven by the buzz around artificial intelligence technology and hopes for continued dominance.
Five members of the so-called “Magnificent Seven” – Apple, Alphabet, Amazon, Meta Platforms and Microsoft – are scheduled to report their latest quarterly profits this week.
Because these stocks are much larger than nearly every other stock, their movements are weighted much more heavily in the S&P 500 and other indexes. The company needs to meet analysts’ growth expectations to justify its recent big move.
That’s not all we have planned for this week.
On Wednesday, the Fed is expected to make its latest decision on what to do with interest rates. Traders expect no policy action, but hopes are rising that a rate cut could be made at the bank’s next meeting in March. This will be the first rate cut since the Fed began significantly raising interest rates two years ago in an effort to curb inflation.
Goldman Sachs economist David Mericle expects the Fed “will aim to keep the March rate cut on the table.” That could be done by removing the qualifier “for some time” that was used in the minutes of the last meeting to describe the duration of the rate cut. Keep your rates high.
A wave of encouraging data has Wall Street believing the dream scenario is coming true. That means the Fed will be able to successfully overcome high inflation and deliver the interest rate cuts that investors desperately need, while also keeping the economy from sliding into the recession that seemed inevitable last year.
Friday’s economic report may strengthen or weaken confidence in that dream. The government is set to release its latest monthly update on the jobs market, with economists expecting employment to continue to rise but at a slower pace. This is exactly what the Fed wants, since too much growth could mean upward pressure on inflation.
Bond yields fell in the bond market ahead of the Fed’s meeting, and the U.S. Treasury said it may not be able to borrow as much as originally expected in the January-March quarter. , government bond yields fell. The yield on the 10-year U.S. Treasury note fell to 4.07% from 4.14% late Friday, easing pressure on the stock market.
This earnings reporting season is expected to be lackluster, with analysts predicting that S&P 500 companies’ earnings per share will decline for the fourth time in the past five quarters. But without the Magnificent Seven, the situation would be even worse.
Facebook’s parent company Meta Platforms is expected to be the single biggest contributor to overall S&P 500 growth, according to FactSet. Nvidia is close behind, followed by Microsoft, Apple, Alphabet, and Amazon.
So far this earnings season, stocks have not risen as much as in previous years, even though companies have beat analyst estimates.
Investment manager Franklin Resources fell 0.3% despite reporting better-than-analyst expectations for its latest quarter’s profit and revenue.
SoFi Technologies’ performance was strong, with shares rising 20.2% after the financial services company reported stronger financial results for the last three months of 2023 than analysts expected. The company’s profit outlook for next year also exceeded analysts’ expectations.
Archer Daniels Midland jumps 5.6% in S&P 500 index to recoup some of steep declines from last week after announcing it is putting its chief financial officer on leave and investigating some of its accounting practices It was the biggest increase. “These sales will not have a material impact on our overall results,” ADM CEO Juan Luciano said in a message to employees Friday. .
Among Wall Street losers, iRobot, which agreed to halt its acquisition by Amazon following scrutiny from antitrust regulators, fell 8.8%.
Monday began with a Hong Kong court’s decision ordering the liquidation of China Evergrande, the world’s most indebted real estate developer. Following the ruling, Chinese markets were mixed, with Hong Kong stocks rising and Shanghai stocks falling.
Chinese authorities also moved to make it more difficult for some investors to “short sell” Chinese stocks, or bet on falling prices. China’s stock market is at the world’s worst level so far this year, due to concerns over a troubled real estate industry as well as a weak economic recovery.
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AP writers Matt Ott and Zimo Zhong contributed.
Stan Cho, Associated Press