(Bloomberg) — Stocks rose after their worst slide this year, with traders gearing up for Nvidia Corp.’s earnings and key inflation data this week.
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A renewed wave of dip buying pushed equities higher, following a late-week selloff. About 350 companies in the S&P 500 advanced Monday as the US benchmark reclaimed its 6,000 mark. The bullish bias has persisted despite mounting risks, with the gauge going 35 sessions without consecutive declines of more than 1% — its longest such streak since late December.
“This could be a key week for a stock market that’s mostly been trading sideways for more than two months,” said Chris Larkin at E*Trade from Morgan Stanley.
Equities bounced back after a rout driven by softer-than-forecast economic data and a jump in inflation expectations. To Steve Sosnick at Interactive Brokers, we won’t know for some time whether the changes in consumer sentiment were spurious and potentially overblown or more lasting in character. Yet that is why the test of “buy-the-dip” is so meaningful.
“If Friday’s dip was simply a blip in the market’s uptrend, then the buyers should benefit,” Sosnick said. “But when we see an early test get swallowed up by more motivated sellers, it should make us consider whether a modest re-rating of fundamentals has truly occurred. The latter could be a more lasting concern.”
The S&P 500 rose 0.1%. The Nasdaq 100 fell 0.4%. The Dow Jones Industrial Average added 0.5%.
Apple Inc. led gains in megacaps. Nvidia pared a drop that approached 3%. Microsoft Corp. fell as an analyst said the software giant dropped some AI data-center leases. Alibaba Group Holding Ltd. tumbled amid a $53 billion AI spending pledge and as The Trump administration took aim at China with a series of moves involving investment, trade and other issues.
The yield on 10-year Treasuries declined three basis points to 4.40%. Bonds remained higher after a $69 billion auction of two-year notes drew a lower-than-expected yield and produced record demand metrics. The dollar was little changed.
“The market is churning sideways, driven by investor confusion, a natural consolidation period following recent gains, and seasonal weakness in February,” said Mark Hackett at Nationwide. “However, the strong macro backdrop, robust earnings, and healthy fund flows argue for a breakout to the upside once momentum returns.”
Just ahead of Nvidia’s results Wednesday, hedge funds’ net exposure to “Magnificent Seven” megacaps hit the lowest since April 2023. Meantime, the Federal Reserve’s preferred inflation metric is expected to cool to the slowest pace since June, but glacial progress on taming price pressures overall will keep officials cautious.
“If we see blowout earnings from Nvidia and softer-than-expected inflation data, that could add upward momentum to stocks,” said Clark Bellin at Bellwether Wealth.
Positioning in mega-cap growth and tech remains very elevated heading into Nvidia’s earnings release due this week, in the 97th percentile and well above levels implied by earnings growth, according to Deutsche Bank AG strategists including Parag Thatte.
Fourth-quarter earnings are on pace to significantly exceed earnings estimates across capitalizations — nearly doubling the preseason forecasts — but it hasn’t been enough to satisfy investors as stocks are responding with unusually sour returns, according to Gina Martin Adams and Wendy Soong at Bloomberg Intelligence.
“Disappointments in guidance, revisions and operating margin all share the blame,” the strategists noted. “Nvidia could still move the needle as the large-cap season wraps up.”
US equities won’t remain unpopular for long given the robust outlook for economic growth and corporate earnings, according to some of Wall Street’s top strategists.
Morgan Stanley strategist Michael Wilson — a bearish voice on US stocks until mid-2024 — said he expects capital to return to US stocks, calling the S&P 500 “the highest quality index” with “the best earnings growth prospects.”
“It’s premature to conclude the rotation away from the US is sustainable,” Wilson wrote in a note.
JPMorgan Chase & Co. strategist Mislav Matejka said a more subdued outlook for big tech was indeed a “meaningful impediment” for a renewed US outperformance more broadly. However, US earnings growth would need to undershoot the rest of the world to support an outright bearish view, he added.
Corporate Highlights:
Apple Inc., as it seeks relief from US President Donald Trump’s tariffs on goods imported from China, said that it will hire 20,000 new workers and produce AI servers in the US.
Microsoft Corp. has canceled some leases for US data center capacity, according to TD Cowen, raising broader concerns over whether it’s securing more AI computing capacity than it needs in the long term.
Berkshire Hathaway Inc.’s operating earnings surged 71% in the fourth quarter, as higher interest rates lifted the conglomerate’s investment income and its insurance business improved.
Starbucks Corp. is eliminating 1,100 corporate jobs in a move aimed at increasing efficiency and quickly enacting changes to revitalize the company.
Domino’s Pizza Inc.’s US sales rose less than expected in the fourth quarter, highlighting the mounting challenge to appeal to cash-strapped Americans.
Boeing Co. has hired an adviser to market a defense subsidiary that manufactures small, long-range military drones as the planemaker looks to unload businesses that aren’t central to its core commercial and defense operations, according to people familiar with the talks.
Apollo Global Management Inc. agreed to buy Bridge Investment Group Holdings Inc. for about $1.5 billion in an all-stock deal as the asset manager expands in real estate.
Strategy, the self-styled Bitcoin treasury company that until recently was known as MicroStrategy, said it acquired $1.99 billion more of the cryptocurrency with the proceeds from last week’s convertible bond sale.
Key events this week:
US consumer confidence, Tuesday
Fed’s Lorie Logan, Tom Barkin, Michael Barr speak, Tuesday
Apple shareholder meeting, Tuesday
US new home sales, Wednesday
Nvidia earnings, Wednesday
Amazon holds devices event, Wednesday
Fed’s Raphael Bostic speaks, Wednesday
Eurozone consumer confidence, Thursday
US GDP, durable goods, initial jobless claims, Thursday
Fed’s Jeff Schmid, Beth Hammack, Patrick Harker, Michael Barr, Michelle Bowman speak, Thursday
Japan Tokyo CPI, industrial production, retail sales, Friday
US PCE inflation, income and spending, Friday
Fed’s Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.1% as of 2:09 p.m. New York time
The Nasdaq 100 fell 0.4%
The Dow Jones Industrial Average rose 0.5%
The MSCI World Index rose 0.1%
Bloomberg Magnificent 7 Total Return Index fell 0.5%
The Russell 2000 Index rose 0.1%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.2% to $1.0481
The British pound was little changed at $1.2642
The Japanese yen fell 0.2% to 149.63 per dollar
Cryptocurrencies
Bitcoin fell 1.6% to $94,208.12
Ether fell 5.6% to $2,651.28
Bonds
The yield on 10-year Treasuries declined three basis points to 4.40%
Germany’s 10-year yield was little changed at 2.48%
Britain’s 10-year yield was little changed at 4.56%
Commodities
West Texas Intermediate crude rose 0.5% to $70.73 a barrel
Spot gold rose 0.4% to $2,948.97 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Cecile Gutscher, Sujata Rao, Lynn Thomasson, Robert Brand and Catherine Bosley.
