NEW YORK, RAW – Wall Street has surged, notching its best day so far in 2022 after another zigzag session, ending a tumultuous week marked by mixed corporate earnings, geopolitical turmoil and an increasingly aggressive Federal Reserve.
All three major US stock indexes began Friday in the red, but turned increasingly green as the session progressed, with tech shares doing the heaviest lifting.
The S&P 500 and the Dow posted gains from last Friday’s close, but the Nasdaq was essentially flat on the week, capping five days of topsy-turvy trading.
Still, the bar for “best daily gains of the year” was rather low. Even with Friday’s jump, the S&P 500 is down seven per cent so far in 2022, with the Nasdaq and the Dow suffering respective drops of 12 per cent and 4.4 per cent over the same time period.
Rick Meckler, partner at Cherry Lane Investments in New Jersey, said investors are trying to adjust to the impact of a higher rate cycle.
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“For some of them, stocks still remain more attractive than bonds in a rising rate environment, and they have been fishing around for where a bottom might be,” he said.
“You’re seeing bargain-hunting in a number of stocks, particularly in the Nasdaq.”
Economic data released on Friday showed a drop in consumer spending coupled with the lowest consumer sentiment reading in a decade, and year-on-year Core PCE prices – the Federal Reserve’s preferred inflation yardstick – came in at 4.9 per cent, slightly hotter than expected.
The Fed made it clear at the conclusion of its monetary policy meeting on Wednesday that they intend to take off their gloves and combat stubbornly persistent inflation by hiking key interest rates more aggressively than many market participants expected.
The Dow Jones Industrial Average rose 564.69 points, or 1.65 per cent, to 34,725.47, the S&P 500 gained 105.34 points, or 2.43 per cent, to 4,431.85 and the Nasdaq Composite added 417.79 points, or 3.13 per cent, to 13,770.57.
Among the 11 major sectors of the S&P 500, all but energy ended green. Tech stocks were the clear winners, gaining 4.3 per cent, the biggest one-day jump for the sector since April 6, 2020.
Fourth-quarter reporting season was firing on all cylinders, with 168 of the companies in the S&P 500 having reported. Of those, 77 per cent have delivered consensus-beating results, according to Refinitiv data.
But investors have been increasingly focused on guidance, and the extent to which companies expect ongoing global supply challenges to affect their bottom line going forward.
“As we move into 2022, and as Omicron peaks and the weather improves, I expect supply-chain pressures to ease,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.
“(They) will probably peak sometime this quarter, and ease throughout the year.”
Data storage equipment maker Western Digital cited supply-chain headwinds after it reported lower than expected revenue and provided a disappointing forecast, sending its shares sliding 7.3 per cent.
Caterpillar fell 5.2 per cent following the equipment maker’s warning that higher production and labour costs will pressure its profit margin.
Chevron dropped 3.5 per cent on downbeat fourth-quarter profit.
However, Apple’s 7.0 per cent jump gave the S&P 500 and the Nasdaq their biggest boost, the day after the company posted record iPhone sales in the holiday quarter.
Visa surged 10.6 per cent following its quarterly earnings beat driven by increased spending on international travel and e-commerce.
Advancing issues outnumbered declining ones on the NYSE by a 1.83-to-1 ratio; on Nasdaq, a 1.92-to-1 ratio favoured advancers.
The S&P 500 posted 5 new 52-week highs and 24 new lows; the Nasdaq Composite recorded 16 new highs and 753 new lows.
Volume on US exchanges was 12.80 billion shares, compared with the 12.10 billion average for the full session over the last 20 trading days.