Shares are rising, building on last week’s rally

US stocks rallied on Monday, extending last week’s gains after the first big gain in 2023 last week.

The S&P 500 (^GSPC) rose 1.3%, while the Dow Jones Industrial Average (^DJI) jumped 270 points, or 0.8%. The tech-heavy Nasdaq Composite ( ^IKSIC ) jumped 2.1%.

The US dollar continued its recent slide as oil prices rose earlier in the week on optimism about demand as China reopens. West Texas Intermediate (VTI) crude futures, the US benchmark, jumped nearly 3% on Monday morning to trade just below $76 a barrel.

Retail stocks were also in focus early Monday, with several companies making news ahead of the key ICR conference this week.

Lululemon ( LULU ) warned that it expects gross margins to fall in the fourth quarter as the company grapples with increased costs due to an inflation-related slowdown in consumer spending. Shares fell 8.5%.

Late Friday, Macy’s ( M ) also warned against rising sales, and shares fell 7% in early Monday trading. Abercrombie & Fitch ( ANF ), in contrast, said its sales decline was likely to be less than feared, with shares rising about 9%.

Shares of Bed Bath & Beyond ( BBBI ), meanwhile, rose 38% in choppy trading — at one point rising as much as 75% — after losing nearly half of their value last week when an infected meme trader said he was in current bankruptcy. Bed Bath & Beyond will report earnings on Tuesday.

Shares of Alibaba ( BABA ) rose about 3.6 percent on Monday, rising for a sixth straight day, after co-founder Jack Ma agreed to relinquish controlling rights over fintech subsidiary Ant Group.

Investors are eyeing December’s consumer price index (CPI) due on Thursday – arguably the most important economic announcement of the month and the last major reading before Federal Reserve officials meet Jan. 31-Feb. 1 to deliver their next rate hike. Wall Street will also face the first series of earnings reports of the upcoming season from Wall Street’s megabanks at the end of the week.

All three major U.S. indexes rose on Friday, boosted by signs of cooling wage growth in the latest monthly jobs report. The S&P 500, Dow and Nasdaq rose at least 2% in the previous session. For the week, the S&P 500 and Dow Jones Industrial Average advanced roughly 1.5%, while the tech-heavy Nasdaq Composite rose 1%.

Nonfarm payrolls rose by 223,000 in December as the unemployment rate fell to 3.5%. The figures show a persistent imbalance between labor supply and demand, but investors cheered easing wage pressures as a sign the Fed may reconsider its ambitious rate hike path.

“There’s no doubt that the labor market has been able to withstand prolonged rate hikes better than many expected,” Mike Lowengart, head of model portfolio construction in Morgan Stanley’s global investment office, said in emailed comments. “Remember, though, that monetary policy acts with a lag, so it’s probably an if, not a when, job slowdown.”

“The Fed’s minutes made it clear that rates will remain high throughout 2023, so investors should brace themselves for a bumpy ride, especially as we head into earnings season and get a glimpse of guidance in the coming weeks.”

Traders work on the stock market at the New York Stock Exchange (NISE) in New York, U.S., January 5, 2023. REUTERS/Andrew Kelly

Traders work on the stock market at the New York Stock Exchange (NISE) in New York, U.S., January 5, 2023. REUTERS/Andrew Kelly

Monday also officially kicks off the first week of fourth-quarter earnings season, with JPMorgan ( JPM ) , the largest U.S. consumer bank, paving the way for what should be a softer-than-usual period for corporate finance as companies grapple with pressures from inflation and higher interest rates. Rate.

Wall Street analysts have consistently cut earnings estimates for S&P 500 companies in the final months of 2022.

Over the past quarter, analysts lowered their EPS forecasts by a larger-than-average margin of 6.5% from Sept. 30 to Dec. 31, according to FactSet Research. By comparison, the average downward revision to EPS estimates from the bottom-up over a quarter was 2.5% over the past five years, 3.3% over the past 10 years and 3.8% over the past 20 years, according to FactSet .

Aleksandra Semenova is a Yahoo Finance reporter. Follow her on Twitter @alekandraandnic

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