SP 500 Nears 5000 Mark After Broad Rally Lifts Stocks

Barry Adams
07 Feb, 2024
New York City

Market indexes rebounded in Wednesday's trading, and investors reviewed another batch of corporate earnings.

The S&P 500 index and the Nasdaq Composite edged higher following lackluster trading in the previous session.

The S&P 500 index approached the 5,000 mark, a record high, as investors increased their bet on the resilient economy and overlooked ongoing interest rate uncertainty.

Investors have bid up stocks, and market indexes have extended their rally to the fourth month in a row following a string of positive earnings and the expectations of interest rate cuts.

However, those expectations were dented after Fed Chairman Jerome Powell confirmed that the rate cut in March is not likely, and stronger-than-estimated job gains in March also suggested that the U.S. economy is resilient even after eleven interest rate increases over the last two years.

Alibaba Group, Uber, Chipotle Mexican Grill, Ford, Pandora, and Yum Brands were in focus after the release of financial results.

New York Community Bank soared 10.6% to $4.65 and traded volatile after Moody's Investors Service lowered the regional bank's debt rating two notches to junk level. 

 

U.S. indexes and yields

The S&P 500 index increased 0.7% to 4,988.36, and the Nasdaq Composite added 0.7% to 15,724.99.

The yield on 2-year Treasury notes decreased to 4.42%, 10-year Treasury notes rose to 4.13%, and 30-year Treasury bonds edged up to 4.33%.

WTI crude oil increased $0.63 to $73.95 a barrel, and natural gas prices increased 0.1 cent to $2.01 a thermal unit.

Gold decreased by $3.22 to $2,032.55 an ounce and extended the previous week's gains after the U.S. dollar rebounded in international trading.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.09.

 

U.S. Stock Movers

Alibaba Group decreased 0.4% to $77.90 after the China-based e-commerce platform operator reported sharply lower quarterly earnings.

Revenue in the December quarter slowed to 5% to 260.35 billion yuan, or $36.67 billion, and net income plunged 77% to 10.7 billion yuan, or $1.5 billion, from a year ago, respectively.

The e-commerce giant also expanded its stock repurchase program by $25 billion to $35.3 billion through March 2027.

Chipotle Mexican Grill jumped 2.5% to $2,550.0 after the fast food restaurant operator reported sharply higher quarterly earnings following a surge in store traffic.

Net sales in the quarter increased 15.4% to $2.52 billion, net income rose to $282.1 million from $223.7 million, and diluted earnings per share advanced to $10.21 from $8.02 a year ago.

The restaurant chain operator said foot traffic increased 7.4% and comparable same-store sales advanced 8.4% from a year ago.

For the full year 2024, the company estimated a same-store sales increase in the "mid-single-digit" range and plans to open between 285 and 315 new stores.

 

U.S. International Trade Gap Drops to a 3-yer Low

The U.S. international trade deficit in goods and services dropped to the lowest level in three years after energy import costs fell and exports edged higher on global demand for capital goods and vehicles.

Exports in 2023 rose 1.2% to $3.05 trillion, and imports decreased 3.6% to $3.8 trillion, the U.S. Bureau of Economic Analysis reported Wednesday.

The trade deficit in 2023 dropped to a three-year low of $773.4 billion, a decline of 19% from the previous year.

The 2023 decrease in the goods and services deficit reflected a decrease in the goods deficit of $121.3 billion, or 10.3%, to $1,061.7 billion and an increase in the services surplus of $56.4 billion, or 24.3%, to $288.2 billion.

The deficit with China decreased from $102.9 billion to $279.4 billion in 2023 as more Chinese companies relocated to Vietnam and Mexico.

However, the deficit with Mexico increased by $21.9 billion to $152.4 billion, and the deficit with Vietnam rose to $104.6 billion.

 

Mixed Markets In Europe, Bond Yields Retreat

European markets traded sideways as investors lowered hopes of rate cuts and reacted to another batch of corporate financial results.

Benchmark indexes in Frankfurt, London, and Paris struggled to gain traction after bond yields edged lower and the euro and the pound weakened.

Investors also reviewed January vehicle sales and passenger car sales in China, and sales faltered after the ending of government incentives.

 

German Industrial Activities Shrank In 2023 

Closer to home, German industrial production fell 1.6% from the previous month in December, the fourth month of contraction in a row.

Industrial activity declined 1.8% in the fourth quarter and dropped 1.5% in 2023.

 

French Trade Deficit Shrank In 2023

France's trade deficit widened in December after imports rose at a faster pace than exports, a report from the customs office showed on Wednesday.

The trade deficit in December rose to €6.8 billion from €5.9 billion in November but fell sharply from €14.7 billion in the month a year ago.

For the entire year 2023, the trade deficit shrank to €99.6 billion from €162.6 billion in 2022, after exports advanced 1.5% and imports declined 7.1%.

 

UK Home Prices Rise Fourth Consecutive Month

UK home prices rose for the fourth month in a row, according to a survey conducted by Lloyds Bank subsidiary Halifax and S&P Global.

The Halifax House Price Index increased 2.5% from a year ago in January, from the upwardly revised 1.8% increase in December.

A typical UK home now costs £291,029, an increase of £3,900 from the last month.

The average house price in London decreased 0.4% from a year ago to £529,528, the highest across all regions in the UK.

“For those looking to buy a first home, the average deposit raised is now £53,414, around 19% of the purchase price. It’s not surprising that almost two-thirds (63%) of new buyers getting a foot on the ladder are now buying in joint names," said Kim Kinnaird, Director of Halifax Mortgages.

"Looking ahead, affordability challenges are likely to remain, and further modest falls should not be ruled out, against a backdrop of broader uncertainty in the economic environment," Kinnard added.

 

Europe Indexes and Yields

The DAX index decreased 0.7% to 16,913.25, the CAC-40 index fell 0.4% to 7,611.21, and the FTSE 100 index inched lower by 0.7% to 7,628.75.

The yield on 10-year German bonds edged down to 2.28%; French bonds inched lower to 2.79%; the UK gilts edged lower to 3.98%; and Italian bonds inched lower to 3.85%.

The euro edged lower to $1.076, the British pound inched higher to $1.263, and the U.S. dollar gained to 87.15 Swiss cents.

Brent crude increased $0.36 to $78.95 a barrel, and the Dutch TTF natural gas decreased by €0.45 to €28.15 per MWh.

 

Europe Stock Movers

Vestas Wind Systems soared 5.9% to DKK 199.30 after the Danish manufacturer of wind turbines swung to a full-year pre-tax profit on the back of strong gains in orders.

Pandora declined 1% to DKK 1,019.50, and the fashion jewelry retailer announced a stock repurchase plan.

TotalEnergies SE declined 2.5% to €58.77 after the French energy company reported lower-than-expected adjusted earnings per share.

TeamViewer SE jumped 4.5% to €14.37 after the German software company reported higher-than-expected sales in the fourth quarter.

 

 

 

Earnings Dominate Asia-wide Trading  

Asian markets advanced tracking gains in overnight trading in New York as investors reassessed interest rate expectations and reacted to the latest batch of earnings.

In overnight trading, markets in New York edged higher as investors shifted their focus from rate uncertainty to the latest corporate results.

 

Nikkei Lacked Direction, KDDI Pursues Lawson

Market indexes in Japan edged higher, and those in China advanced for the second day in a row in the hopes that policymakers will provide more support and the sovereign wealth fund will continue to purchase stocks and stabilize markets.

The Nikkei 225 average declined 0.2% to 36,076.22, and market indexes trimmed losses amid positive corporate earnings.

Toyota Motor jumped 3.9% to ¥3,260.0 after the largest automotive company in the world by unit sales reported better-than-expected fiscal third-quarter sales.

The vehicle manufacturer also increased its full-year revenue outlook on the back of the strength in hybrid sales.

GS Yuasa soared 20% to ¥2,541.0 after the maker of lead acid and lithium-ion batteries reported sales in the nine-month ending in December rose 9.8% to ¥411 billion and net income more rose 124% to ¥17.7 billion.

The company forecasted fiscal year sales to increase 8% to ¥560 billion and net income attributable to shareholders to jump 51% to ¥21 billion.

Lawson jumped 13% to ¥10,280.0 after the retailer received a tender offer from KDDI for ¥500 billion or $3.4 billion, and after the deal, Mitsubishi Corp. and KDDI will jointly own the company with an equal stake of 50% each.

KDDI, the telecom company plans to use data from convenience store to promote its banking and insurance and offer Lawson products to customers of its 2,200 'au' mobile phone outlets across Japan. 

 

China Vehicle Sales Plunged in January

Total vehicle sales, including exports, surged 47.9% from the previous year and dropped 22.7% from a year ago to 2.44 million units, according to a report from the China Association of Automobile Manufacturers.

Exports accounted for 18.2%, or 443,000 vehicles, and new energy vehicles soared 78.8% and accounted for 29.9% of total vehicle sales.

 

China Indexes Rebounded On Stimulus Hopes

Market indexes in Shanghai and Hong Kong advanced for the second day in a row amid optimism that policymakers are working on additional steps to stabilize financial markets.

The Chinese regulators also banned securities lending to brokers for selling short, arresting the market decline in the short term.

Benchmark indexes in the previous session jumped 4% in Hong Kong and 3% in Shanghai after a unit of China's sovereign wealth fund confirmed purchasing index-focused exchange-traded funds.

The CSI index advanced 0.5% to 3,326.57, and the Hang Seng index edged down 0.1% to 16,124.92.

China's stock markets are expected to resume their selling as the government struggles to devise plans to support overleveraged property developers and plunging property prices. 

Over the years, Chinese local governments relied on the sale of land to property developers to fund rapid but wasteful infrastructure buildup, which came to a screeching halt during the pandemic-era lockdowns.

Residential buyers also walked away from making additional purchases after several large developers failed to complete housing projects, adding to the price declines.

Travel and entertainment-related stocks were in focus ahead of the start of the Lunar New Year holidays.

Chinese hotpot restaurant chain Haidilao jumped 1% to HK$13.28.

Yum China added 13.8% to HK$330.0 after the fast food company reported rising sales and announced its plan to buy back its shares.

Alibaba Group declined 1.8% to HK$75.0 ahead of the company releasing its quarterly results later in the day.

Longfor, China Resources Land, and China Vanke decreased between 0.3% and 2.5%.

 

India Indexes Extended Gains Following Steady Fund Flows and Positive Earnings

Stocks in Mumbai opened higher, and investors reacted to the latest batch of earnings.

Benchmark indexes advanced in early trading amid earnings optimism and a steady flow of new funds from domestic and international investors.

Banks, financial services providers, food product makers, and tech services were among the leading gainers.

The Reserve Bank of India is widely anticipated to hold rates steady at the end of its policy meeting on Thursday.

The Sensex index increased 152.47 points to 72,338.57, and the Nifty index gained 52.40 points to 21,981.80.

On the Mumbai stock exchange, 311 stocks traded at their 52-week highs and 16 stocks traded at their 52-week lows.