9.40am: Salesforce gains as activist investor takes big stake
US stocks were little changed at the open on Monday as investors eye a slew of corporate earnings to be released over the course of the week as well as economic data that could suggest a slowdown in rate hikes from the Federal Reserve.
Just after the market opened, the Dow Jones Industrial Average shed 32 points to 33,344, while the S&P 500 added 6 points at 3,979 and the tech-heavy Nasdaq Composite rose 60 points to 11,200.
Notable stock movers included Salesforce Inc, which moved up nearly 3% following news that activist investor Elliott Management has reportedly made a multi-billion dollar investment in the software company.
“With investors growing more confident on the inflation side, it is clear they are now looking beyond the current hiking cycle, to an eventual pause and potentially even cuts down the line,” wrote Deutsche Bank strategist Henry Allen wrote in a note to clients.
“But with investors now priced for good news on inflation, the risk is that if inflation does prove more persistent, then we could be in another bear market rally just as we saw last summer,” he added.
6.30am: Corporate earnings, GDP and inflation data all due
Wall Street is set for a positive start on Monday, with many Asian markets closed for the Lunar New Year, ahead of a slew of corporate earnings and economic data due later in the week.
Futures for the Dow Jones Industrial Average (DJIA) rose 1% in pre-market trading, while those for the broader S&P 500 index gained 1.8%, and contracts for the Nasdaq-100 jumped 2.8%.
“After a torrid 2022 in which the rising interest rate environment sucked much of the life from growth stocks, there has been some bargain hunting from investors who wonder whether there has been an overshoot of depressed valuations,” commented Richard Hunter, head of markets at interactive investor.
“The backdrop has clearly had some effect on some of the larger tech names which have announced job layoffs in the face of possible recessionary worries. Google parent Alphabet is the latest to cut jobs, following on the heels of the likes of Microsoft and Amazon,” he added.
Stocks ended higher on Friday as investors reacted in part to the wave of layoffs, particularly in the US tech sector. The Nasdaq notched up its third straight week of wins, adding 2.7% to finish at 11,140 points. The S&P 500 was up 1.9% at 3,973 and the DJIA rose 1% to close at 33,375.
Hunter noted that the Nasdaq has added 6.4% so far in the year-to-date, most recently underpinned by numbers from Netflix, which added more subscribers than expected in the latest quarter, while the Alphabet job cuts news also met with a warm reception.
“The market faces a barrage of earnings to consider this week, with an estimated quarter of the S&P500 reporting,” he added. “The likes of General Electric, Johnson & Johnson, Tesla, Boeing, Visa and Microsoft are all capable of nudging the dial not only in terms of the latest quarterly earnings, but also the outlook based on current trading conditions.”
Among the important economic releases due later in the week are US fourth quarter GDP and the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditure price index, Hunter said.
Comments from a Fed member on Friday added to some of the day’s gains.
“While the comments did not veer from the Fed’s mantra of bringing inflation under control at all costs, there was some suggestion that rates could be getting nearer to being “sufficiently restrictive” to finish off the job,” Hunter said. “Nonetheless, the two economic camps of either recession or a soft landing will continue to anticipate outcomes as the year progresses.”