The S&P 500 was boosted by advances in Nvidia Corp. (NASDAQ: NVDA) and Microsoft Corp. (NASDAQ: MSFT) The Nasdaq 100 rose more than 1%. Netflix Inc. (NASDAQ: NFLX) shares soared after subscriber numbers surpassed expectations. The US 10-year yield hovered around 4.15%. The Bloomberg Dollar Spot Index fell.
US data showing US business activity expanded in January by the most in seven months is positive for stocks, according to Renaissance Macro’s Neil Dutta.
“Growth is up and inflation is down. The former puts a ceiling on how many cuts the Federal Reserve will do while the latter means the Fed still ends up cutting,” he said. “Very good scenario for equity markets.”
With earnings due later in the day from Tesla Inc. (NASDAQ: TSLA) and International Business Machines Corp., the spotlight remains on the tech sector. Even more broadly, the US earnings season so far indicates companies are coping well with higher interest rates.
Fundstrat Global Advisors LLC’s Tom Lee expects a rally to eventually extend beyond just last year’s high-flying tech stocks.
“With Fed signaling future cuts, the 5% earned on money market has a short shelf life,” he wrote in a note to clients. “Thus, we see the $5.5 trillion in money markets moving to equities — of course, not the full balance. But any moves would be positive for stocks and for expanding market breadth.”
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Meanwhile, Bank of Canada held its key interest rate at 5%, as expected, and signaled it’s done hiking. Also on the roster this week is European Central Bank’s policy meeting on Thursday.
Euro-area bond yields slipped earlier after data showed business activity contracted in January for the eighth month. Traders are now pricing in 136 basis points worth of interest-rate cuts by year-end, eight basis points more than on Tuesday.
Elsewhere, industrial metals prices received a boost after China signaled plans to stimulate its economy by cutting the reserve requirement ratio for banks. The move should allow Chinese banks to step up lending and their purchases of government bonds. The news also supported Brent crude around $80 a barrel.
