US stocks end higher after choppy trading session

U.S. stocks rose in a choppy trading session on Tuesday as investors weighed a recent string of strong earnings results against lingering uncertainty about the impact of higher interest rates this year. .

The S&P 500 added 0.7%, climbing for a third consecutive session. The blue-chip Dow Jones Industrial Average and the tech-heavy Nasdaq Composite both rose 0.8%.

Equities started February on a wobbly note, prolonging some of the unease that has characterized markets so far this year. On Monday, the S&P 500 closed January with a 5.3% loss, its largest since March 2020. The Nasdaq fell again, losing 9%.

Growing investor concern over the resilience of the US stock market to tighter monetary policy was behind the selloff. The Federal Reserve announced last week that it would begin raising rates in mid-March, prompting traders to reorganize their portfolios. Many dumped stocks of high-growth companies and turned to stocks and funds that seemed safer, such as dividend-paying stocks.

The start of a new month brought new earnings reports and economic data for investors to analyze. Traders also say they continue to focus on how to position portfolios to account for higher interest rates ahead.

“We have relatively good economic conditions, in terms of well above normal GDP growth, a strong labor market and consumers and businesses with strong balance sheets,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. . “But you have these big headwinds from the Federal Reserve raising rates and cutting [its] balance sheet. I think investors are trying to decide what the right level is…to buy dips, but also to make sure they’re prepared for potential volatility down the road.

Mr. Zaccarelli said he currently prefers to reposition himself in higher quality companies with good profitability. He said he found opportunities in sectors such as finance and energy.

Fund managers say they are watching earnings closely for clues about how companies are handling inflation and supply chain issues. This week, some earnings reports showed strong results. Exxon Mobil gained 6.5% after reporting 2021 profit of $23 billion, its highest total since 2014.

United Parcel Service shares rose 14% after reporting an increase in quarterly profit. U.S.-listed shares of Swiss group UBS rose 9% after the bank raised its financial targets and said it had the firepower to buy back up to $5 billion of shares this year .

“One of the themes this year was that earnings would be the main driver of the market,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. Some 77% of S&P 500 companies that have reported results so far have exceeded earnings-per-share expectations, according to FactSet data earlier this afternoon.

The stock market has entered correction territory as investors reassess the value of the market after the Federal Reserve announced its intention to raise interest rates. The WSJ’s Dion Rabouin explains. Illustration: David Croc

Data released on Tuesday showed that US manufacturing activity slowed last month. The Institute for Supply Management’s manufacturing report of business PMI fell to 57.6 – a reading above 50 usually signals expansion – in January, from 58.8 in December. The report showed that the Covid-19 Omicron variant and supply chain hurdles were among the issues weighing on the business.

A separate report from the Labor Department said hiring and the number of worker quits slowed in December compared to the previous month.

Of the 11 sectors in the S&P 500, energy stocks posted the biggest gain on Tuesday. Industrials and materials stocks also rallied.

Megacap tech stocks, on the other hand, traded mixed. Microsoft lost 0.7%, while Netflix added 7%. Tech companies suffered in January’s sell-off as rising interest rates threatened to weigh on their expensive valuations, which are based on long-term growth expectations.

“Tech has entered the year very, very expensive, making it all the more vulnerable to a rate hike,” said Seema Shah, chief strategist at Principal Global Investors. “It makes sense that there was this selloff, but for tech you have to be a long-term investor and think about future trends.”

In the bond market, the yield on the benchmark 10-year Treasury bill rose to 1.799% from 1.780% on Monday. Yields and bond prices move in opposite directions.

The Fearless Girl statue in front of the New York Stock Exchange.


Photo:

Spencer Platt/Getty Images

Overseas, the pancontinental Stoxx Europe 600 index rose 1.3%. In Asia, Chinese markets were closed. Japan’s Nikkei 225 gained 0.3%.

Write to Caitlin McCabe at [email protected] and Will Horner at [email protected]

Corrections & Amplifications
Manufacturing activity in the United States slowed last month to its lowest level since November 2020, according to the Institute for Supply Management’s Business PMI Manufacturing Report. An earlier version of this article incorrectly stated that this was the lowest level since September 2020. (Corrected February 1.)

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