(Feb 10): US stocks gained on Monday, recovering from a rocky start, as traders geared up for a busy week of economic data.
The S&P 500 Index advanced 0.5% at 11.10am in New York, extending Friday’s gain of 2%. The tech-heavy Nasdaq 100 Index rose 0.6% while the Cboe Volatility Index hovered at around 17.
“After last Friday’s dramatic tech-fueled rebound, investors return to critical data, most notably January non-farm payrolls on Wednesday,” said Joe Mazzola, head trading and derivatives strategist at Charles Schwab. “Last week’s S&P 500 whipsaw from 2% losses to almost even sent volatility to new two-month peaks, and after-shocks can’t be ruled out.”
Refraining from big bets, equity traders are readying themselves for a series of key reports that will give clues on the interest-rate cut path of the Federal Reserve. Three indicators that most move markets — payrolls, consumer price index, and retail sales — will all come as the week progresses.
With Jerome Powell nearing the end of his term as Fed chair and Kevin Warsh expected as his successor, Capital.com’s Daniela Hathorn notes that markets are “increasingly sensitive to how data influences rate expectations.” And while leadership changes have an impact on tone and communication, data continues to be the “ultimate driver”.
See also: US consumer sentiment rises unexpectedly to a six-month high
“As a result, the employment and inflation releases this week will be critical in determining whether markets lean back into expectations of easing — a scenario that could support equities and precious metals — or whether sticky inflation forces continued restraint,” she added.
Tech worries
A rout in tech stocks brought turbulence to last week’s trading, with market participants concerned with disruption from artificial intelligence (AI) as well as Big Tech’s capital spending plans for the technology. Stocks seen as vulnerable to AI were dropped in favor of more cyclical names.
See also: Traders chase ‘AI resistant’ stocks as disruption fear hits tech
Those AI-related concerns still linger, though names that took the biggest hits during the selloff started to rally on Friday, particularly in software. The iShares Expanded Tech-Software Sector ETF advanced 2.3%, extending gains for a second-straight session. AppLovin Corp soared 14%.
However, Wells Fargo Investment Institute’s Sameer Samana points out there can often be “knee-jerk rallies” when markets sell off as certain areas within the tech sector have.
“Time will tell if we need a retest or if enough value was created for buyers to step in,” Samana said.
While Friday’s rally nearly erased what was a brutal mid-week slide, Goldman Sachs Group Inc’s trading desk said US stocks face more selling this week from trend-following algorithmic funds — regardless of market direction.
“If we do indeed see some selling from these momentum-based algos, there is no guarantee that the stock market will rebound immediately after this selling ends,” said Miller Tabak’s Matt Maley. “Of course, we might not see any of this potential selling.”
In a separate note, Goldman noted that hedge funds piled into short positions on US stocks as concerns about disruption to business models from artificial intelligence reverberated through markets.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
In terms of single-stock moves, Cleveland-Cliffs Inc slumped 19% after the steel company reported fourth-quarter adjusted Ebitda that missed consensus estimates on low sales volumes. Hims & Hers Health Inc. plunged 23% as the telehealth company said it will stop selling its recently-launched copycat version of the new Wegovy weight-loss pill.
Apollo Global Management Inc gained as the asset manager’s fourth-quarter assets under management met analyst estimates. Becton Dickinson & Co fell as the medical technology company reported first-quarter revenue for its life sciences business.
Uploaded by Felyx Teoh
