Nasdaq Jumped 2% After Chip Stocks Soared, World Markets Advanced

Barry Adams
23 Jan, 2023
New York City

Tech stocks led the charge for the second day in a row after investors warmed up to less aggressive rate hikes and adjusted earnings outlook as businesses prepare for economic slowdown.  

Market sentiment was positive on the hopes that more policymakers may support a smaller rate hike at the Fed's meeting next week despite the tight labor market conditions. 

Earnings calendar also dominated market focus as investors seek more insights in how companies are handling cost inflation and dealing with decelerating demand. 

About 400 companies are scheduled to release earnings including Visa, MasterCard, IBM, General Electric, Verizon, Boeing, General Dynamics and Hess Corp. 

Spotify SA was the latest tech company to announce significant job cuts as tech companies prepare for a different economic reality after the pandemic-driven boom. 

Market exuberance was driven in part on the hopes of a rebound in China business activities after China pivoted from "zero-covid" to "peak infection" policy. 

The positive sentiment was also supported by Japan scaling back its antivirus measures and reopening borders as early as this spring. 

India was in focus after Amazon.com Inc said it plans to launch its air cargo service in India, one of the fastest growing e-commerce markets. 

Apple also plans to increase its iPhones production in India from 5% to 7% to 25% and local reports suggested that the company exported $1 billion of phones from India in December. 

Apple launched its latest iPhone model from the fast-growing economy. 

The S&P 500 index increased 1.1% to 4,019.65 and the Nasdaq Composite index advanced 2.0% to 11,364.41.

Lumber futures in Chicago trading continued to rebound from the low $330 a thousand board feet reached on January 13 to close at $437.70 as real estate activities remained depressed. 

 

Crude Oil Advance to 2-month High

Crude oil traded near a 2-month high as investors assess global demand and supply and brace for additional sanctions on Russian oil from the European Union and the U.S. 

Crude oil decreased 8 cents to $81.65 a barrel and natural gas edged higher 26 cents to $3.44 a thermal unit. 

 

U.S. Treasury Yields Hold Firm 

The yield on 2-year Treasury notes inched higher to 4.24%, 10-year Treasury notes edged up to 3.52% and 30-year Treasury bonds increased to 3.70%. 

 

U.S. Stock Movers 

Tech stocks advanced on the hopes of slower rate hikes and Netflix soared 4% and Microsoft, Amazon.com, IBM and Adobe gained between 1% and 2%. 

AMD soared 9% and Intel gained 4% on the hopes of a rebound in sales as Chinese economy gathers pace after a weeklong holiday to mark the new Lunar Year. 

Qualcomm jumped 6% and Microchip Technology advanced 4%. 

Apple Inc rose 3.2% to $142.23 and the maker of popular computing devices is looking to diversify its manufacturing base following the rising tensions between China and the U.S. 

Apple Inc plans to increase its iPhones production in India to 25% from the current 5% to 7%, commerce and industry minister Piyush Goyal said today.

Spotify Technology SA increased 2.2% to $100.22 after the audio streaming platform said it plans to trim its workforce by 6%. 

Baker Hughes Company declined 1.1% to $30.74 after the oil services provider reported higher revenues but profit dropped in the fourth quarter. 

Revenue increased 7.7% to $5.91 billion from $5.49 billion last year and net income dropped 38% to $182 million from $394 million and diluted earnings per share declined to 18 cents from 44 cents a year ago. 

The oil services provider retained its positive outlook for the energy sector despite tightening monetary conditions and operating challenges under recessionary conditions. 

 

Euro Area Sentiment Improved, Euro at New 9-month high 

European markets closed higher and tech stocks led the gainers after positive sentiment supported broad market advance. 

Benchmark indexes in the region advanced on the hopes of China's reopening, falling natural gas prices and slower rate hikes in the U.S. but the European policymakers supported aggressive rate hikes at the next meetings in February and March. 

The Euro Area consumer sentiment index in January 2023 improved to the high not seen since February 2022 on the hopes of lower energy prices and the region may avoid a recession this year.

The sentiment index increased by 1.1 points to -20.9 in January, the European Commission said in a release Monday. 

 

Broad Rally Power European Market Advance  

The DAX index increased 0.5% to 15,102.95, the CAC-40 index rose 0.5% to 7,032.02 and the FTSE 100 index closed up 0.2% to 7,784.67. 

The euro rose to a new 9-month high of $1.09 on the expectations of 50 basis points rate increases at least at the next meetings in February and March.

The euro inched higher to a new 9-month high of $1.09, the British pound edged lower to $1.233 and the Swiss franc closed down to 92.39 U.S. cents. 

The yield on 10-year German Bunds advanced to 2.20%, French bonds traded higher to 2.65%, the UK Gilts to 3.35% and the Italian bonds to 4.01%. 

Brent crude oil increased 49 cents to $88.12 a barrel and the Dutch TTF natural gas futures contract price fell 90 cents to €66.0 per MWh. 

 

Europe Stock Movers 

CNH Industrial NV gained 0.6% to €15.79 and the agriculture equipment maker was in focus after union workers ratified a new contract for two manufacturing locations in Iowa. 

Balfour Beatty Plc increased 1.06% to 363.80 pence after the construction company won a 1.2 billion contract from National Highways to build  'Roads North of the Thames' network for the proposed Lower Thames Crossing.

Saga Plc increased 2.5% to 154.21 pence after the over-50 travel services provider said it is seeking a buyer for its in-house insurance underwriting operation.  

Nokia Oyj increased 1.6% to €4.29 after the Finnish telecom company signed a cross-license patent agreement with Samsung Electronics. 

National Express Group Plc increased 4.2% to 143.28 pence after the company said its German unit National Express Rail GmbH secured a one billion euros contract for rail operations in Germany.  

Dignity Plc soared 8.5% to 545.0 pence after the company agreed to be acquired by a consortium of investment companies including Phoenix Asset Management Partners, Castelnau Group and SPWOne V Limited. 

The company's board accepted a cash offer of 550 pence a share valuing the funeral homes operator at  approximately £281 million on a fully diluted basis and an implied enterprise value of approximately £789 million. 

The cash offer represents 29.3% premium to the closing price of 425.5 pence of Dignity Share on January 3. 

 

Yen Drifts Lower, Tepco Seeks Higher Rates 

Markets in Tokyo closed higher after the yen retreated from 7-1/2 month high reached last week and the Bank of Japan's minutes of meeting showed that the central bank took actions to improve bond market functioning. 

The Bank of Japan left its ultraloose monetary policy intact after the two-day meeting ending on December 20 but the meeting was also adjourned for 30 minutes to allow government representatives to discuss with the finance ministry, highlighting the gravity of the decision.  

Tokyo Electric Power Company declined 1.5% to ¥445.0 and the power utility company said it applied to the industry ministry to raise the residential utility rate by 30% from June to cover the higher fuel procurement expenses. 

Tepco also estimated a financial year ending in March loss of ¥317 billion or $2.4 billion compared to a ¥5.64 billion profit in the previous year, due to higher natural gas import prices and elevated wholesale electricity costs. 

The Nikkei 225 index added 1.3% to 26,906.04 and the yen closed at 130.63 against the U.S. dollar. 

 

Infection Spike Worries China Investors 

Markets in mainland China, Hong Kong, Singapore and South Korea were closed to celebrate the Lunar New Year. 

Chinese markets will resume normal operations on January 30. 

In Friday's trading, the Shanghai Composite index jumped 0.8% to  26,906.04  and the Hang Seng index advanced 1.8% to 22,044.65. 

 

Bank Earnings Lift India Indexes 

Stocks in Mumbai traded higher after five leading banks, Axis Bank, Canara Bank and ICICI Bank, IDBI and Kotak Mahindra reported higher than expected earnings.  

Indian market sentiment was also positive after the U.S. Fed officials' comments supported smaller rate hikes in New York on Friday. 

The Sensex index added 0.5% or 319.90 points to 60,941.67 and the Nifty index jumped 0.5% or 90.90 to 18,118.55. 

The rupee edged lower to 81.30 against the U.S. dollar.