Day: March 3, 2023

(C) Reuters.

By Yasin Ebrahim

Investing.com — The S&P 500 rallied Friday, searching for its first weekly in gain in four weeks as Treasury yields eased from more than decade highs.

The S&P 500 gained 1.5%, the Dow Jones Industrial Average added 1.04%, or 352 points, and the Nasdaq Composite was up 1.9%.

The 10-year Treasury yield moved back below the key 4% level after recently hitting its highest level since 2010. The retreat in yields comes even as data showing an expected return to growth in U.S. services activity for the first time in eight months suggested the economy remains resilient enough to withstand further rate hikes.

“Demand has clearly slowed on the goods side of the economy, but the service sector is still cranking,” Jefferies said in a note. “Service sector businesses are still having difficulty in meeting demand.”

Strong economic data has forced investors to rethink how much more Fed tightening is needed to materially slow the economy.

Investors are now forecasting the Fed to lift rates to a terminal rate as high as 5.46%, well above the 4.95% level seen at the end of last year, Stifel said in a note.

Growth sectors of the economy including consumer discretionary and tech, both of which are vulnerable to rising rates, were bolstered by the fall in Treasury yields.

Tesla (NASDAQ:TSLA) was the biggest gainer in consumer stocks following data showing that demand in China rose after the electric vehicle maker cut prices.

Tesla’s monthly sales climbed 13% to 74,402 vehicles in February, according to preliminary data from China’s Passenger Car Association released Friday.

In tech, Apple Inc (NASDAQ:AAPL) rallied more than 3% after Morgan Stanley reiterated its Buy rating on the stock, citing “underappreciated catalysts” including iPhone and services gross margins near all-time highs and future product launches.

Meta Platforms (NASDAQ:META) was also in the ascendency, up more than 6%, after the social media giant cut the price of its virtual reality headsets at a time when Wall Street continues to talk up the company’s potential boost from artificial intelligence.

In other AI-related stock news, C3 AI Inc (NYSE:AI) reported fiscal third-quarter results that beat Wall Street’s expectations, driven by new business wins and the expansion of partnerships, sending its shares up 33%.

The AI enterprise company also delivered upbeat guidance, with management reiterating their target to reach non-GAAP operating profitability by the fiscal fourth quarter.

Semiconductor stocks also pushed tech higher, underpinned by a more 5% jump in Broadcom Inc (NASDAQ:AVGO) after the chipmaker delivered stronger than expected guidance and its quarterly results topped estimates.

The chipmaker is “well positioned for a soft landing,” UBS says, as its positioning in “high-end networking and compute offload should prove highly advantageous as hyperscalers look to rapidly scale AI infrastructure.”

Marvell Technology (NASDAQ:MRVL) took some shine off chip stocks after reporting mixed fourth-quarter results and guidance that fell short of estimates as it continues to work through bloated inventory levels following pandemic-led stockpiling.

Elsewhere on the earnings front, Costco Wholesale (NASDAQ:COST) reported fiscal second-quarter earnings that beat estimates, but revenue and February same-store sales fell short amid a weaker consumer.

Goldman Sachs said it continued to have confidence in COST’s value proposition continuing to resonate with consumers and noted that the wholesale retailer’s management attributed the weakness in February to adverse weather.

(C) Reuters. FILE PHOTO: A man watches an electric board showing Nikkei index outside a brokerage at a business district in Tokyo, Japan, June 21, 2021. REUTERS/Kim Kyung-Hoon

By Lawrence Delevingne and Elizabeth Howcroft

(Reuters) – Wall Street stocks posted strong gains while Treasury yields and the dollar pulled back on Friday as data pointing to U.S. economic growth boosted risk appetite, even as expectations for rate hikes kept bond yields near multi-year highs.

The U.S. services sector grew at a steady clip in February, with new orders and employment rising to more than one-year highs, suggesting the economy continued to expand in the first quarter.

U.S. shares jumped, with the Dow Jones Industrial Average up 1.17%, the S&P 500 1.61% higher, and the Nasdaq Composite adding nearly 2%.

“Following weeks of relentless upward pressure on interest rates, the S&P 500 got a bit of a reprieve today,” said Bill Sterling, global strategist at GW&K Investment Management in Boston.

He added that the small differential between shorter-term bonds indicated lower recession risk: “Market participants seem to be saying that the economy – and corporate profits – can withstand a higher-for-longer interest rate path.”

Asian stocks already jumped on investor optimism of a Chinese economic rebound. The positive market sentiment continued during the European session, with Europe’s STOXX 600 up 0.92%.

The recovery in euro zone business activity gathered pace last month, PMI survey data showed, in the latest piece of data to suggest the bloc would avoid a recession.

But euro zone government bond yields were still near their highest levels in years after euro zone inflation data on Thursday drove market expectations for the European Central Bank’s (ECB) terminal rate to around 4%.

At 2.688%, the benchmark 10-year German yield was near its highest level since 2011.

U.S. Treasury yields paused their rally. The U.S. 10-year Treasury yield fell to 3.960%, down from Thursday’s high of 4.091%. The two-year Treasury yield, which typically moves in step with interest rate expectations, dipped 4.3 basis points at 4.859%.

Federal Reserve Bank of Boston President Susan Collins reiterated in comments made public Friday that more central bank rate rises will be needed to lower high inflation levels.

Investors are trying to gauge that exact path for Federal Reserve rate hikes, after strong U.S. data in recent weeks suggested rates may need to be higher for longer.

“Our overall view is still more consistent with slow disinflation amid some further improvement to global growth,” Goldman Sachs (NYSE:GS) market strategists wrote in a note late Thursday. “That mix should maintain the upward pressure on yields but ultimately limit the damage to equities and provide an overdue tailwind to commodities.”

The MSCI world equity index, which tracks shares in 47 countries, jumped 1.47% on the day, up 5.8% for the year.

DOLLAR RETREATS

The euro ticked up 0.33% on the day, while the U.S. dollar slid from a 2-1/2-month high versus the Japanese yen on Friday, its largest weekly loss since mid-January against a basket of six major currencies.

Analysts polled by Reuters were unfazed by the dollar’s recent strength, up about 7% over the last 12 months, and predicted a weaker greenback in a year amid an improving global economy and expectations the Fed will stop hiking interest rates well ahead of the ECB.

Oil prices rose, recovering from an early slump after Reuters reported that the United Arab Emirates is not planning an exit from the Organization of Petroleum Exporting Countries (OPEC). U.S. crude rose 2% to $79.73 per barrel and Brent was at $85.86, up 1.31% on the day.

Spot gold added 1% to $1,854 an ounce.

Bitcoin was down nearly 5% at around $22,381, its lowest price since Feb. 15.

(C) Reuters.

By Yasin Ebrahim

Investing.com — The Dow rallied Friday, snapping a four-week losing streak as growth stocks including tech fought back from their selloff after Treasury yields eased from more than a decade highs.

The Dow Jones Industrial Average added 1.2%, or 386 points, closing the week 1.7% higher. The Nasdaq Composite was up 2%. The S&P 500 gained 1.6%.

The 10-year Treasury yield moved back below the key 4% level after recently hitting its highest level since 2010. The retreat in yields comes even as data showing an expected return to growth in U.S. services activity for the first time in eight months suggested the economy remains resilient enough to withstand further rate hikes.

The recent string of strong economic data has forced investors to rethink how much more Fed tightening is needed to materially slow the economy. Markets are now forecasting the Fed to lift rates to a terminal rate as high as 5.46%, well above the 4.95% level seen at the end of last year, Stifel said in a note.

Still, with the Fed closing in on the end of its rate-hike cycle, some on Wall Street believe the trend for the year is higher and pullbacks in the broader market are a buying opportunity.

“For long term investors, the recent pullbacks are buying opportunities,” Jimmy Lee, Founder and CEO of The Wealth Consulting Group, told Investing.com’s Yasin Ebrahim in an interview earlier this week.

“The main point that investors need to understand is that the fed is going to stop raising rates probably before the summer starts,” Lee added. “And if that happens, I think that a lot of late money will come into the market.”

Growth sectors of the economy including consumer discretionary and tech, both of which are vulnerable to rising rates, were bolstered by the fall in Treasury yields.

Tesla (NASDAQ:TSLA) was the biggest gainer in consumer stocks, up 3.6%, following data showing that demand in China rose after the electric vehicle maker cut prices.

Tesla’s monthly sales climbed 13% to 74,402 vehicles in February, according to preliminary data from China’s Passenger Car Association released Friday.

In tech, Apple Inc (NASDAQ:AAPL) rallied more than 3% after Morgan Stanley reiterated its Buy rating on the stock, citing “underappreciated catalysts” including iPhone and services gross margins near all-time highs and future product launches.

Meta Platforms (NASDAQ:META) was also in the ascendency, up more than 6%, after the social media giant cut the price of its virtual reality headsets at a time when Wall Street continues to talk up the company’s potential boost from artificial intelligence.

In other AI-related stock news, C3 AI Inc (NYSE:AI) reported fiscal third-quarter results that beat Wall Street’s expectations, driven by new business wins and the expansion of partnerships, sending its shares up 33%.

The AI enterprise company also delivered upbeat guidance, with management reiterating their target to reach non-GAAP operating profitability by the fiscal fourth quarter.

Semiconductor stocks also pushed tech higher, underpinned by a more than 5% jump in Broadcom Inc (NASDAQ:AVGO) after the chipmaker delivered stronger than expected guidance and its quarterly results topped estimates.

The chipmaker is “well positioned for a soft landing,” UBS says, as its positioning in “high-end networking and compute offload should prove highly advantageous as hyperscalers look to rapidly scale AI infrastructure.”

Marvell Technology (NASDAQ:MRVL) took some shine off chip stocks after reporting mixed fourth-quarter results and guidance that fell short of estimates as it continues to work through bloated inventory levels following pandemic-led stockpiling.

Elsewhere on the earnings front, Costco Wholesale (NASDAQ:COST) reported fiscal second-quarter earnings that beat estimates, but revenue and February same-store sales fell short amid a weaker consumer.

Goldman Sachs said it continued to have confidence in COST’s value proposition continuing to resonate with consumers and noted that the wholesale retailer’s management attributed the weakness in February to adverse weather.