NEW YORK (`) — U.S. stocks rose Monday to open a week in which Wall Street's most influential stocks could show whether the high expectations generated for them are justified.
The S&P 500 gained 36.96 points, or 0.8%, to set another record at 4,927.93. The Dow Jones Industrial Average rose 224.02, or 0.6%, to 38,333.45, and the Nasdaq Composite jumped 172.68, or 1.1%, to 15,628.04.
Big Tech stocks are the main reason the S&P 500 has risen more than 35% to a record two autumns ago. A small handful of seven accounted for the majority of index returns during this time, driven by excitement around artificial intelligence technology and expectations of continued dominance.
Five members of this group, nicknamed “The Magnificent Seven,” will report their latest quarterly earnings next week: Apple, Alphabet, Amazon, Meta Platforms and Microsoft.
It's an encouraging start to the trading week on Wall Street. The `'s Seth Sutel reported.
Because they are so much more massive than almost all other stocks, their moves carry much more weight on the S&P 500 and other indices. They need to meet analysts' growth expectations to justify their recent huge moves.
And that's not all that's coming this week.
On Wednesday, The Federal Reserve will make its latest decision about what to do about interest rates. Traders expect the central bank to take no action but hope it could cut interest rates at its next meeting in March. That would be the first downward move since the Fed began sharply raising interest rates two years ago to bring inflation under control.
David Mericle, an economist at Goldman Sachs, expects the Fed to “aim to keep a rate cut on the table in March.” This could be achieved by removing the “for some time” criterion it used in the minutes of its last meeting to describe how long it expects to keep interest rates high.
A wave of encouraging data has Wall Street believing its dream scenario can come true: The Fed will successfully overcome high inflation and deliver the rate cuts investors want while the economy pulls through without falling into a recession, the latter year seemed inevitable.
On Friday, an economic report could strengthen or weaken belief in that dream. The government is set to release the latest monthly labor market update and economists expect hiring to continue to increase, albeit at a slower pace. That's exactly what the Fed wants to see, because too much growth could mean upward pressure on inflation.
Treasury yields fell in the bond market ahead of the Fed meeting and after the U.S. Treasury said it might not borrow as much as initially expected in the January-March quarter. The yield on the 10-year Treasury note fell to 4.07% from 4.14% late Friday, easing pressure on the stock market.
Earnings reporting season is expected to be lackluster as analysts predict a fourth decline in earnings per share for S&P 500 companies in the last five quarters. But without the Magnificent Seven it would be even worse.
According to FactSet, Facebook's parent company, Meta Platforms, is expected to be the single largest contributor to the growth of the entire S&P 500. Nvidia is close behind, followed by Microsoft, Apple, Alphabet and Amazon.
So far this reporting season, companies have not seen their share prices rise as sharply as usual after beating analysts' forecasts.
Franklin Resources, an investment manager, fell 0.3% even as the company reported higher profit and revenue than analysts expected for its latest quarter.
SoFi Technologies fared better, with its shares rising 20.2% after the financial services company reported better-than-analysts expected results for the final three months of 2023. The profit forecast for the coming year also exceeded analysts' estimates.
Archer Daniels Midland rose 5.6%, the biggest gain in the S&P 500, to recoup part of its sharp loss from last week after the company placed its chief financial officer on leave and said it was investigating some of its accounting practices. In a message to employees Friday, ADM CEO Juan Luciano said that “these sales do not have a material impact on our overall results.”
On the losing side of Wall Street I robot fell 8.8% after Amazon agreed to cancel its purchase following an antitrust review.
Monday began with the order decision from a court in Hong Kong the liquidation of China Evergrande, the most indebted real estate developer in the world. Chinese markets were mixed following the ruling, with stock prices rising in Hong Kong and falling in Shanghai.
Chinese authorities have also taken steps to make it harder for some investors to “short” Chinese stocks or bet that their prices will fall. China's stock markets have been among the worst in the world so far this year, amid worries not only about the struggling real estate sector but also about a weak economic recovery.
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` writers Matt Ott and Zimo Zhong contributed.
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