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Stocks were up slightly Friday, though technology stocks’ earlier gains faded. Investors were also looking ahead to the conclusion of earnings season.
In afternoon trading, the
Dow Jones Industrial Average
was up 104 points, or 0.3% after the index slipped 21 points Friday to close at 35,089. The
S&P 500
rose 0.1%, with the technology-heavy
Nasdaq Composite
down 0.1%. That’s a reversal from this morning, when the Nasdaq was leading the major indexes higher.
Friday, the Nasdaq gained 1.6% as investors bought up beaten-down tech names after
Meta Platforms‘ (ticker: FB) disappointing earnings report and outlook caused a wave of selling. That added to an already painful period for tech stocks this year, which have been hit hard by rising bond yields as the Federal Reserve looks to lift interest rates and reduce the size of its balance sheet. Higher yields make future profits less valuable, and many tech companies are expecting a bulk of their profits to come many years in the future. The Nasdaq is still down almost 13% from its late November all-time high.
But late last week companies like
Amazon.com, (AMZN)
Snap (SNAP) and
Pinterest (PINS) reported better-than-expected earnings, sending those stocks—and the rest of tech—higher.
Tech stocks still face problems, as bond yields continue to rise. The 10-year Treasury yield, already at a pandemic-era high of 1.93% Monday, could be headed above 2%, the consensus on Wall Street. That’s partly because long-term expectations for annual inflation are still above 2%, and bond investors usually demand a rate of return that’s higher than the inflation rate.
There’s a kernel of good news, though. The market isn’t selling off as it did on many days in January. While the S&P 500 is still down 6% from its all-time high hit in early January, it’s slowly emerging out of its recent drawdown, which had brought it to a level about 12% below its all-time high on an intraday basis. Now, there are enough buyers to keep the index away from that low point, even on days like Monday, when it is declining a bit.
A key technical indicator illustrates that point. At the end of January, when the S&P 500 got hit hard, the index bottomed at around 4,275. That’s higher than its bottom of 4,222 a few days prior to that. So the index’s higher low indicates that buyers are willing to step in with the market trading at a higher level than before. “Said higher low is the most critical component of this potential bullish… pattern,” wrote Frank Cappelleri, chief market technician at Instinet.
Looking ahead, fourth-quarter earnings season is drawing to a close with a few more large companies still to report. This week, about 9% of the S&P 500’s market capitalization will report earnings, including
Pfizer (PFE),
Disney (DIS),
PepsiCo (PEP),
Coca-Cola (KO) and
CVS Health (CVS).
Already, about three-quarters of the S&P 500’s market cap has reported earnings, with the aggregate earnings result beating estimates by almost 8% and the majority of companies beating by any margin, according to Credit Suisse.
That hasn’t helped stocks much. That’s because investors are still reassessing stock valuations—and when those are too high, investors demand an even larger earnings beat to buy more shares of the reporting company.
Overseas, London’s
FTSE 100
rose 0.8% while Tokyo’s
Nikkei 225
ended the day 0.7% lower.
In the commodity space, oil prices were easing back from seven-year highs. U.S. futures for West Texas Intermediate crude were down about 1.4% to just below $91 a barrel. The oil benchmark began the year at just $76 a barrel.
It was a buoyant day for cryptocurrencies. Bitcoin, the leading digital asset, was up almost 2% over the past 24 hours to above $42,000, according to data from CoinDesk, having breached the psychologically-important $39,000 mark Friday.
Here are five stocks on the move Monday:
Peloton (PTON) shot up 19% amid speculation that companies including Amazon,
Nike (NKE), and
Apple (AAPL) may be considering a takeover of the embattled home-workout group. Shares in Peloton are down more than 31% so far this year.
Spirit Airlines (SAVE) stock gained 17% after news broke that it will merge with
Frontier Group Holdings (ULCC), which saw its stock rise 3.4%.
Tyson Foods (TSN) stock rose 11% after the company reported a profit of $2.87 a share, beating estimates of $1.93 a share, on sales of $12.9 billion, above expectations for $12.2 billion.
Snowflake (SNOW) stock added 7.9% after getting upgraded to Overweight from Equal Weight at Morgan Stanley.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com and Jack Denton at jack.denton@dowjones.com
Read More:Stock Market Today: Dow Holds Steady, Bitcoin Pops, Peloton Soars
2022-02-07 19:11:00