Stocks Rise as Investors Bet on Slowing Rates, Await Earnings


U.S. stocks rose Monday as investors bet the Federal Reserve will dial back its interest-rate increases and braced for a busy week of corporate earnings reports.

The S&P 500 added 47.20 points, or 1.2%, to 4019.81. The Dow Jones Industrial Average gained 254.07 points, or 0.8%, to 33629.56. The Nasdaq Composite moved 223.98 points, or 2% higher, to 11364.41.

The stock market has rebounded to start 2023 as investors predict moderating inflation will encourage the Fed to ease its interest-rate lifts and potentially cut rates later this year.

The central bank is preparing to slow its rate increases for a second consecutive meeting, The Wall Street Journal reported Sunday. Officials are set to consider a smaller quarter-percentage-point lift at its policy meeting next week, while deliberating what economic signals they would need to see before pausing rate rises this spring.

“Investors are under the impression that the Fed will likely raise rates by a lesser amount at the upcoming meeting. That’s an encouragement to investors,” said

Sam Stovall,

chief investment strategist at CFRA Research.

Areas of the market hardest hit in last year’s selloff have led the rally in the new year as the prospect of slowing rates has given investors confidence to pick up shares of companies promising growth in the future. Technology stocks have climbed, with the Nasdaq Composite up more than 8% in 2023.

Growth-oriented assets continued to shine on Monday. The S&P 500’s information-technology segment was the best-performing sector in the index. Chip stocks moved higher;

Advanced Micro Devices


AMD 9.22%

added $6.46, or 9.2%, to $76.53 and

Nvidia


NVDA 7.59%

rose $13.54, or 7.6% to $191.93.

“Today is a continuation of what we’ve seen on a year-to-day basis, which is people reallocating to the losers from last year,” said

Michael Green,

portfolio manager and chief strategist at Simplify Asset Management.

Salesforce gained $4.62, or 3.1%, to $155.87 after the Journal reported that Elliott Management had taken a big stake in the software company. Spotify Technology shares advanced $2.03, or 2.1%, to $99.94 after the music-streaming company said it was laying off 6% of its staff

Mixed earnings reports and weak economic data have weighed on stocks in recent sessions.



Photo:

Michael M. Santiago/Getty Images

Investors are also awaiting a busy week of earnings reports, with nearly a fifth of S&P 500 companies due to announce quarterly results. Among the bellwethers on deck to report this week are Boeing, Comcast, Chevron, International Business Machines, Microsoft and Tesla.

Though traders are betting the Fed will cut rates later this year, some money managers are predicting that rates could stay higher for longer as the central bank has more work in store to tame inflation.

Daniel Morris,

chief market strategist at BNP Paribas Asset Management, said that is one reason why the firm is taking a cautious stance on stocks. It is also betting that two-year Treasury yields will rise relative to yields on six-month bills, which could happen if market forecasts for interest rates pick up again.

“Inflation isn’t going to slow down as fast as the market expects,” Mr. Morris said.

Treasury prices fell Monday, pushing the yield on 10-year Treasury notes up to 3.522% from 3.483% Friday. The yield on the interest rate-sensitive two-year note rose to 4.238% from 4.181%. Yields fell for a third-straight week last week on signs of slowing economic growth.

Oil prices rose. Front-month Brent crude futures climbed 0.6% to $88.19 a barrel, extending a rally driven by expectations of rising Chinese demand.

Global markets were broadly higher. Technology and basic-resource stocks led the advance in Europe, where the Stoxx Europe 600 added 0.5%. Japan’s Nikkei 225 rose 1.3%. Mainland Chinese markets are closed all week for Lunar New Year. In Hong Kong, markets are closed through Wednesday.

Write to Joe Wallace at joe.wallace@wsj.com and Hannah Miao at hannah.miao@wsj.com

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