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U.S. stocks were higher on Monday, rebounding from their hefty losses last week, as traders parsed economic data in the form of durable goods orders while speculating about the Federal Reserve’s path forward on rate hikes.
Wall Street’s major indices had come off their session highs, but were holding onto gains. The tech-heavy Nasdaq Composite (COMP.IND) was up 0.77% to 11,482.70 points in morning trade. The benchmark S&P 500 (SP500) was higher by 0.53% to 3,991.18 points, while the blue-chip Dow (DJI) advanced 0.32% to 32,921.90 points.
All 11 S&P sectors were trading in the green, led by Consumer Discretionary and Industrials. Health Care gained the least.
The benchmark S&P 500 on Friday posted its worst weekly performance since early December last year with losses of nearly 3%. Hotter-than-expected inflation data this month has cast doubt on whether a disinflationary process has begun, as observed by Fed chief Jerome Powell in the last monetary policy committee meeting. Concerns that the central bank would have to stick with rate hikes has weighed on sentiment.
“Looking back on last week … both equities and fixed income retreated as markets priced in further central bank hikes following mounting evidence that inflation was continuing to prove persistent,” Deutsche Bank’s Jim Reid said.
Friday’s U.S. PCE inflation data “led markets to swiftly price in a more aggressive price of rate hikes from the Fed. In particular, there was growing speculation that the Fed might step up their hikes to 50bps again, with a +30.3bps move priced into the next meeting in March, up from +27.5bps at the start of the week,” Reid added.
Monday’s economic calendar saw the release of January durable goods orders, which fell 4.5% for its biggest drop since the lockdown. December was revised down. Core orders rose more than expected, but also saw downward revisions to December.
“Headline orders were depressed by a steep drop in orders for civilian aircraft, reversing the December jump, and clearly signalled by Boeing’s orders data,” Pantheon Macro’s Ian Shepherdson said.
“The increase in orders ex-transportation was the biggest since March last year but it follows a 0.4% decline in December and – like most of the other activity data for January – it likely was boosted by the much warmer-than-usual weather in January. This won’t last, and mean reversion likely will be spread across February and March,” Shepherdson added.
Additionally, pending home sales for January soared 8.1%, significantly higher than the anticipated rise of 1% as mortgage rates fell.
Turning to the fixed income markets, yields were slightly lower. The 10-year Treasury yield (US10Y) was down 2 basis points to 3.93%. The 2-year yield (US2Y) was down 1 basis point to 4.80%.
Among active stocks, Union Pacific (UNP) surged and was the top percentage gainer on the S&P 500 (SP500) after the company said it would search for a new CEO amid activist investor pressure.
Enphase Energy (ENPH) was also among the top S&P percentage gainers after a stock upgrade.
Shares of Seagen (SGEN) jumped after a report that Pfizer (PFE) was in early talks to buy the company.
