Wall St closes up on hopes of abating Fed

All three major US stock indexes gained momentum throughout the first session. PHOTO: NYTIMES

NEW YORK - US stocks closed higher on Monday, extending last week’s advances as signs of economic softness suggested the effects of the Fed’s aggressive policy aimed at cooling the economy, thereby curbing decades-high inflation, are beginning to take root.

All three major US stock indexes gained momentum throughout the first session of a week jam-packed with high profile corporate earnings and crucial economic data.

A report from S&P Global showed a contraction in business activity this month, offering a hint that the Federal Reserve’s barrage of steep interest rate hikes are having their desired effect, raising hopes that the central bank could begin slowing the pace of increases to the Fed funds target rate.

“It’s a sign the economy is slowing down and what the Fed is doing is working,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “They may be achieving their goal and we might be approaching the fourth quarter of rate hikes, to use an football analogy.”

According to preliminary data, the S&P 500 gained 45.94 points, or 1.22 per cent, to end at 3,798.69 points, while the Nasdaq Composite gained 94.83 points, or 0.87 per cent, to 10,954.55. The Dow Jones Industrial Average rose 421.31 points, or 1.36 per cent, to 31,503.87.

Among the 11 major sectors in the S&P 500, healthcare was enjoying the largest percentage gain.

Tesla Inc shares slid after the electric automaker cut prices for its Model 3 and Model Y cars by as much as 9 per cent in China, signaling softening demand in the world’s largest auto market.

US-listed shares of Chinese companies such as Pinduoduo , JD.com and Baidu Inc plunged as President Xi Jinping introduced the new Politburo Standing Committee stacked with loyalists.

“The news coming out of China makes you think there’s going to be a firmer if not antagonistic China in our future,” Tuz added. “But it’s too early to see how it’s going to play out as far as where you invest in the future.”

Third quarter earnings season shifts into overdrive this week. So far, nearly one-fifth of the companies in the S&P 500 have reported. Of those, 74.7 per cent have delivered consensus-beating results, according to Refinitiv data.

Analysts expect S&P 500 earnings growth of 3.0 per cent, on aggregate, down from 4.5 per cent at the beginning of the month, per Refinitiv.

Results from a slew of heavy-hitting tech and tech-adjacent companies are likely to dominate the earnings chatter this week.

Microsoft Corp and Alphabet Inc following on Tuesday. On Wednesday, Apple Inc and Meta Platforms Inc step up to the plate, with Amazon.com wrapping up the FAANGs on Thursday.

High-rolling industrials are also expected to post earnings this week, including United Parcel Service, Boeing Co , Ford Motor Co, 3M Co, General Motors Co , Chevron and Exxon Mobil.

Twitter Inc results are expected shortly. REUTERS

Follow ST on LinkedIn and stay updated on the latest career news, insights and more.