The U.S. stock market displayed a muted performance on Monday, with Wall Street showing a slight upward trend in early trading. Investors are gearing up for a significant week, where the performance of major tech stocks will be closely observed to determine if the high expectations built around them are justified.
As of 9:35 a.m. Eastern time, the S&P 500 was 0.1% higher, the Dow Jones Industrial Average rose by 0.1%, gaining 47 points, and the Nasdaq composite edged up by 0.1%. The remarkable surge of over 35% in the S&P 500, primarily attributed to Big Tech stocks, has raised anticipation around the quarterly earnings reports of the “Magnificent Seven” tech giants: Apple, Alphabet, Amazon, Meta Platforms, and Microsoft.
These tech giants, being significantly larger than most other stocks, exert substantial influence on the S&P 500 and other indexes. Their quarterly performances will be closely scrutinized to assess whether they meet analysts’ growth expectations and justify the substantial market moves.
Aside from tech earnings, the Federal Reserve’s decision on interest rates, scheduled for Wednesday, is another focal point. While no rate change is anticipated, there is hope for a rate cut in the following meeting in March, potentially marking the first decrease since the Fed’s aggressive interest rate hikes commenced two years ago to address high inflation.
Encouraging economic data has fueled optimism that the Fed’s strategy to combat inflation will succeed, leading to anticipated rate cuts. Friday’s release of the monthly job market update will play a crucial role in shaping investor sentiment. Analysts predict continued job market growth, albeit at a more moderate pace, aligning with the Fed’s desire to avoid excessive inflationary pressures.
Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley, emphasized the significance of the week, stating, “If the market is going to sustain its latest breakout, it may need to avoid earnings disappointments from this week’s Big Tech lineup, get encouraging news from the Fed on interest rates, and see jobs numbers that are solid, but not too hot.”
Despite expectations of lackluster overall earnings for S&P 500 companies in this reporting season, the Magnificent Seven, including Meta Platforms, Nvidia, Microsoft, Apple, Alphabet, and Amazon, are anticipated to contribute significantly to the index’s growth.
On the downside, iRobot faced a 15.5% decline after canceling its acquisition by Amazon due to antitrust scrutiny. Additionally, stocks of oil and gas companies experienced a dip amid fluctuations in crude oil prices driven by concerns about violence in the Middle East.
The day began with a Hong Kong court ordering the liquidation of China Evergrande, the world’s most indebted property developer. Chinese markets responded mixedly to this ruling, with stock prices rising in Hong Kong but falling in Shanghai. Chinese authorities also introduced measures to make shorting Chinese stocks more challenging, reflecting ongoing concerns about the property industry and the country’s economic recovery.
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