NEW YORK, Jan 11 (Reuters) – U.S. stocks closed strongly on Wednesday, with the S&P 500 and Nasdaq each gaining more than 1% as investors were bullish on an inflation report that could give the Federal Reserve room to reduce its level. Aggressive interest rate hikes.
Economists polled by Reuters project the long-awaited report to be released on Thursday to show US consumer prices grew 6.5% year-on-year in December, moderating from a 7.1% rise in November.
Among the sectors, real estate (.SPLRCR) and consumer discretionary (.SPLRCD) had the strongest performance of the day, while Microsoft (MSFT.O)amazon.com (AMZN.O) and other mega-cap growth names gave the S&P 500 its biggest boost.
The benchmark index is up so far for 2023 after falling sharply last year. Hopes that the Fed may soon ease its aggressive tightening again after raising the federal funds rate seven times in 2022 have buoyed the market in recent sessions, even as comments from some Fed officials have supported the Fed view. that the central bank should remain vigilant about raising rates to combat inflation.
“Investors anticipate that we are closer to a pause than at any time in the past year,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. He said that he would be welcomed by the market.
Also, “whenever you have a down year, it’s not surprising that many times you have a reversal at the start of the new year,” he said.
The Dow Jones Industrial Average (.DJI) rose 268.91 points, or 0.8%, to 33,973.01, the S&P 500 (.SPX) gained 50.36 points, or 1.28%, to 3,969.61 and the Nasdaq Composite (.IXIC) added 189.04 points, or 1.76%, to 10,931.67.
Money market participants see a 75% chance that the Fed will raise the benchmark rate by 25 basis points in February.
This week also marks the start of fourth-quarter earnings season for S&P 500 companies, with overall S&P 500 earnings expected to have declined year-over-year, according to IBES data from Refinitiv.
The largest US banks, due to start the season later this week, are expected to report lower quarterly earnings as risks of a recession rise due to monetary policy tightening.
Goldman Sachs (SG.N) started lay off staff on Wednesday in a sweeping drive to cut costs, a source familiar with the matter said. Goldman Sachs shares finished down 2%.
Retailer Bed Bath & Beyond Inc (BBBY.O) considerably extended recent gains to finish at 68.6% despite dismal quarterly resultsand some investors speculate that it could be a possible acquisition target.
Volume on US exchanges was 11.42 billion shares, compared with the full-session average of 11 billion over the past 20 trading days.
Advancing issuances outnumbered declining ones on the New York Stock Exchange by a ratio of 3.78 to 1; on Nasdaq, a 2.25-to-1 ratio favored advancers.
The S&P 500 posted 11 new 52-week highs and 1 new low; The Nasdaq Composite posted 98 new highs and 20 new lows.
Reporting by Caroline Valetkevitch; Additional reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Edited by Shounak Dasgupta and Grant McCool
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