NEW YORK CITY, RAW – The tech-heavy Nasdaq has risen but is still on track for its worst start to the year as investors shied away from stocks with lofty valuations amid aggressive rate hike bets and geopolitical tensions.
Valuations of growth and technology stocks have come under increasing scrutiny, with the Nasdaq declining 10.5 per cent so far this month.
“The January barometer, which states ‘as goes January, so goes the year’, will be negative, implying investors are in for a challenging year,” Sam Stovall, chief investment strategist at CFRA Research, said.
Five of the 11 major S&P sectors advanced in early trading, led by a 0.9 per cent gain in technology stocks.
Tesla Inc rose 5.5 per cent after Credit Suisse raised its stock rating to “outperform” while Netflix Inc gained 8.0 per cent after Citigroup upgraded the streaming company’s shares to “buy”.
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The bellwether S&P 500 has fallen 6.5 per cent so far this month and is on track to report its worst month since the pandemic-led crash in March 2020.
The US Federal Reserve last week signalled it intends to combat the four-decade high inflation by hiking key interest rates more aggressively than many market participants expected.
Fed funds futures traders are pricing in almost five rate increases by year-end, with some banks, such as the Bank of America, now eyeing seven hikes this year.
Geopolitical tensions have added to market uncertainty, with the US and its allies threatening Russia with new economic sanctions if it attacks Ukraine.
In early trading, the Dow Jones Industrial Average was up 7.17 points, or 0.02 per cent, at 34,732.64, the S&P 500 was up 20.82 points, or 0.47 per cent, at 4,452.67, and the Nasdaq Composite was up 200.32 points, or 1.45 per cent, at 13,970.89.
The steep drop in US equities has investors gauging valuations to determine whether now is the time to bargain hunt, with some eyeing results that could bolster the case for investors looking to buy at a discount.
The fourth-quarter earnings season continues with megacaps such as Google parent Alphabet Inc, Amazon Inc and Meta Platforms Inc expected to report later this week, following strong results from Apple Inc and Microsoft Corp this month.
As of Friday, a third of S&P 500 companies have posted earnings, and 77.4 per cent of them reported above analyst expectations, according to Refinitiv.
Beyond Meat Inc rose 9.9 per cent after Barclays upgraded the plant-based patty maker’s stock to “overweight”.
Citrix Systems Inc’s shares fell 3.7 per cent after the software company said it had agreed to be taken private for $US16.5 billion ($A23.4 billion) including debt by affiliates of Elliott Management and Vista Equity Partners.
Advancing issues outnumbered decliners for a 1.32-to-1 ratio on the NYSE and a 2.54-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and no new low while the Nasdaq recorded 12 new highs and 28 new lows.