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Wall Street rallies, capping frenetic week with best day of the year

  • Apple jumps after record sales during the holiday quarter
  • Visa leaps on rising travel and e-commerce spending
  • Caterpillar falls after reducing pressure on margins
  • Rise in indices: Dow 1.65%, S&P 2.43%, Nasdaq 3.13%

NEW YORK, Jan 28 (Reuters) – Wall Street surged on Friday, marking its best day so far in 2022 after another zigzag session, ending a tumultuous week marked by mixed corporate earnings, geopolitical unrest and an increasingly aggressive Federal Reserve.

All three major US stock indices started the day in the red, but turned increasingly green as the session progressed, with tech stocks (.SPLRCT) making the biggest push.

The S&P 500 and Dow posted gains from last Friday’s close, but the Nasdaq was essentially flat on the week, capping five days of upside trading.

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Still, the bar for “best daily gains of the year” was pretty low. Even with Friday’s jump, the S&P 500 is down 7% so far in 2022, with the Nasdaq and Dow having suffered declines of 12% and 4.4% respectively over the same period.

“Investors are trying to adjust to the impact of this cycle of higher rates,” said Rick Meckler, partner at Cherry Lane Investments, a family-owned investment office in New Vernon, New Jersey. “For some of them, equities still remain more attractive than bonds in a rising rate environment, and they looked for where a bottom might be.”

“You’re seeing bargain hunting on a number of stocks, particularly on the Nasdaq,” Meckler added.

Economic data released on Friday showed a drop in consumer spending coupled with the weakest reading of consumer sentiment in a decade, and year-over-year Core PCE prices – the Federal Reserve’s favorite inflation indicator – fell. are set at 4.9%, slightly higher than expected.

The chart below shows the extent to which the core PCE and other major indicators have exceeded the Fed’s 2% average annual target.

Inflation

The Fed made clear after its monetary policy meeting on Wednesday that it intended to take off its gloves and fight stubbornly persistent inflation by raising key interest rates more aggressively than previously anticipated by many market players.

The Dow Jones Industrial Average (.DJI) rose 564.69 points, or 1.65%, to 34,725.47, the S&P 500 (.SPX) gained 105.34 points, or 2.43%, to 4,431.85 and the Nasdaq Composite (.IXIC) added 417.79 points, or 3.13%, to 13,770.57.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 26, 2022. REUTERS/Brendan McDermid

Of the 11 major S&P 500 sectors, all but energy (.SPNY) ended green. Tech stocks (.SPLRCT) were the big winners, gaining 4.3%, the biggest one-day jump for the sector since April 6, 2020.

The fourth quarter reporting season was in full swing, with 168 of the S&P 500 companies reporting. Of these, 77% provided results that exceeded the consensus, according to data from Refinitiv.

But investors have increasingly focused on forecasts and how companies expect current global sourcing challenges to affect their bottom line going forward.

“As we enter 2022, and Omicron peaks and the weather improves, I expect supply chain pressures to ease,” said Ross Mayfield, strategy analyst at investment at Baird in Louisville, Kentucky. “(They) will likely peak in this quarter and decline throughout the year.”

Data storage equipment maker Western Digital (WDC.O) cited supply chain headwinds after reporting lower-than-expected revenue and providing disappointing guidance, sending its shares tumbling 7.3% .

Caterpillar Inc (CAT.N) fell 5.2% on the OEM’s warning that rising production and labor costs will put pressure on its profit margin. Read more

Chevron Corp (CVX.N) fell 3.5% on falling fourth-quarter profit. Read more

However, Apple’s 7.0% jump gave the S&P 500 and Nasdaq their biggest boost, the day after the company posted record iPhone sales during the holiday quarter. Read more

Visa Inc (VN) jumped 10.6% after beating quarterly profits on higher spending on international travel and e-commerce.

Advancing issues outnumbered declining ones on the NYSE by a ratio of 1.83 to 1; on the Nasdaq, a ratio of 1.92 to 1 favored advancers.

The S&P 500 posted 5 new 52-week highs and 24 new lows; the Nasdaq Composite recorded 16 new highs and 753 new lows.

Volume on U.S. exchanges was 12.80 billion shares, compared to an average of 12.10 billion for the full session over the past 20 trading days.

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Reporting by Stephen Culp in New York Additional reporting by Caroline Valetkevitch in New York, Devik Jain and Bansari Mayur Kamdar in Bengaluru Editing by Sriraj Kalluvila and Matthew Lewis

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