US stocks opened higher on Monday, continuing their gains after opening the year with a rally late last week.
Shortly after the opening bell on Monday, the S&P 500 (^GSPC(up 0.6%, while the Dow Jones Industrial Average)^ DJI) added about 165 points, or 0.5%. The technology-intensive Nasdaq composite (^IXIC) gained 1.1%.
The US dollar continued its recent slide as the price of oil mobilized to start the week on optimism around demand as China reopens.
West Texas Intermediate (WTI) crude futures, the US benchmark, jumped nearly 3% on Monday morning to trade just below $76 a barrel.
Retail stocks were also in focus early Monday, with several companies announcing news before the key ICR conference this week.
lululemon (lulu) warned him on Monday morning Expects lower gross margins in fourth quarter As the company struggled with rising costs due to an inflation-driven slowdown in consumer spending. Shares fell 10% in early trading.
Late Friday, Macy’s (M) also warned of sales growth, and shares fell 4.4% on Monday morning. Abercrombie & Fitch (ANF), on the other hand, said its sales decline would likely be less than feared, sending shares up around 2% on Monday morning.
Bed Bath & Beyond Shares (BBBY), meanwhile, gained as much as 18% in early trading – at up to 75% more tearing stitch – after shares lost nearly half their value last week after the beleaguered meme stock retailer said bankruptcy was on the table. Bed Bath & Beyond is expected to report results on Tuesday.
Ali Baba (baba) shares soared around 4% on Monday morning, rising for a sixth straight day, after co-founder Jack Ma has agreed to relinquish control rights of fintech subsidiary Ant Group.
Investors await Thursday’s release of the December consumer price index (CPI) – arguably the most important economic release of the month and the last significant reading before Federal Reserve officials meet Jan. 1. 31-Feb. 1 to make their next interest rate hike. Wall Street will also have to deal with the first batch of revenue from the next Wall Street megabank reporting season at the end of the week.
The three main American indices flew out on fridaypropelled by signs of slowing wage growth in the latest monthly jobs report. The S&P 500, Dow and Nasdaq all jumped at least 2% in the previous session. For the week, the S&P 500 and Dow Jones Industrial Average each rose about 1.5%, while the tech-heavy Nasdaq Composite rose 1%.
Non-farm payrolls increased by 223,000 in December while the unemployment rate fell to 3.5%. Figures show persistent imbalance between labor supply and demand, but investors encourage easing pressures as a salary sign the Fed could reconsider its ambitious rate hike path.
“There’s no doubt that the labor market has been able to weather prolonged rate hikes better than many had expected,” said Mike Loewengart, head of model portfolio construction at the Global Investment Office. Morgan Stanley in comments via email. “Remember, though, that monetary policy acts with a lag, so it’s probably an if and not a when for a slowdown in hiring.”
“The Fed minutes made it clear that rates will remain high through 2023, so investors should be prepared for a bumpy ride, especially as we enter earnings season and get a glimpse forecasts in the coming weeks.
Monday also officially begins the first week of the fourth quarter earnings season, with JPMorgan (JPM), the largest consumer bank in the United States, paving the way for what is shaping up to be a milder-than-usual period for corporate finances, as businesses grapple with the pressures of the inflation and higher interest rates.
Wall Street analysts have steadily cut earnings estimates for S&P 500 companies in the final months of 2022.
During the last quarter, analysts lowered their EPS forecasts by an above-average margin of 6.5% from September 1. 30 to Dec. 31, according to data from FactSet Research. By comparison, the average downward revision to quarter-on-quarter EPS upward estimates was 2.5% over the past five years, 3.3% over the past 10 years and 3.8% over the past few years. Last 20 years, by FactSet.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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