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U.S. stocks rallied on Monday as Wall Street looks to rebound from the worst week of the year.
The S&P 500 (^GSPC) rose by 0.4%, while the Dow Jones Industrial Average (^DJI) gained 0.2%. Contracts on the technology-heavy Nasdaq Composite (^IXIC) increased by 0.7% during midday trading.
The yield on the benchmark 10-year U.S. Treasury note ticked down to 3.934% Monday.
On the economic data side, new orders for manufactured durable goods in January plunged to 4.5%, the biggest drop since April 2020, the Census Bureau reported. The drop was more pronounced than economist estimates of 4.0%.
"The manufacturing sector will remain under pressure in the months ahead, but the details of January's report of durable goods orders and shipments suggest factory activity started the year on a better note than the headline figure would suggest," Lydia Boussour, EY Parthenon Senior Economist, wrote in a statement following the release.
Meanwhile, the National Association of Realtors’ index of pending home sales climbed 8.1% to 82.5 in January, higher from the projected estimate of 1.0% by Bloomberg economists, according to data the group released on Monday. On a yearly basis, however, pending transactions plunged by nearly 24%.
"The increase in the Pending Home Sales Index confirms that the US housing market has improved, or better put, has somewhat stabilized over the last several months due to lower mortgage interest rates," Raymond James' Chief Economist Eugenio Aleman, wrote in statement to Yahoo Finance. "However, the recent increase in mortgage rates is probably going to inflict some more pain on the US housing market going forward."
Stocks closed out the worst week of 2023 on Friday after the Federal Reserve’s preferred inflation gauge showed it unexpectedly accelerated in January and consumer spending jumped. The “core” Personal Consumption Expenditures (PCE) price index – which excludes volatile food and energy components – showed prices climbed 0.6% in January and 4.7% from last year.
The Commerce Department also reported consumer spending rose 1.8% last month from December, the largest increase in nearly two years. The survey’s results renewed anxiety among investors that the Fed would continue its aggressive tightening campaign against inflation.
The drop in optimism pressured the major indexes, as the Dow Jones dropped 3% for its fourth consecutive losing week, while the S&P 500 shed 2.7% in its worst week since early December and the tech-heavy Nasdaq sank 3.3%.
Data compiled by 22V Research has found that rising interest rates have increased the correlation between growth and value stocks has jumped to the highest level since at least 2005.
This week, investors will remain keen on the retail sector, with earnings from Target (TGT) on deck before market open on Tuesday after Walmart (WMT) warned of cautious profit guidance for the year ahead. Home improvement retail giant Home Depot (HD) also had disappointing guidance for fiscal 2023.
Elsewhere on the earnings calendar are results from Costco (COST), Macy's (M), Dollar Tree (DLTR), and Kohl's (KSS) to feature the retail side.
Meanwhile, the share of companies topping analysts' expectations in the fourth quarter has been low compared to history. Data from FactSet showed that 68% of S&P 500 companies reported fourth quarter earnings that beat expectations, down from the five-year average of 77% and the 10-year average of 73%.
In single stock moves, Seagen Inc. (SGEN) shares jumped Monday morning after a report from The Wall Street Journal said Pfizer (PFE) is in early-stage talks to acquire cancer drugmaker company in what could be a multi-billion dollar deal.
Berkshire Hathaway Inc. (BRK-B) stock rose following CEO Warren Buffett’s annual letter to shareholders, which offered readers a glimpse into his views on share buybacks, taxes, corporate accounting, and his sense of optimism about the economy.
Shares of Union Pacific (UNP) climbed after the largest freight operator announced its plans to name a new chief executive following pressure from activists to oust Lance Fritz from the job.
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