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Wall Street posts a strong January gain as investors bet for a Fed’s policy tweak

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Wall Street resumed its winning streak as growth stocks continued to rally ahead of the Fed’s rate decision. Nasdaq rose more than 10% for the month, posting the best monthly gain since July 2022. A slew of positive earnings has also fuelled the broad-based rally, with General Motors jumping 8% and Exxon Mobil up 1.8%. The last few influential tech companies are set to report earnings later this week. In Asian time, Meta Platforms’ results are due for release tomorrow. Earnings for Apple, Amazon, and Alphabet will be on Friday morning. Markets are now pricing in a 25-bps rate hike by the Fed tomorrow, implying a further slowdown in the pace of interest rate increases. The US bond yields slid, sending the US dollar down, and boosting the risk-on euphoria. Commodities, including metal and energy, all reversed early losses and finished higher.

Asian markets were all down on Tuesday as risk-off apprehension caused a broad selloff. However, equity futures point higher across the APAC region, with ASX futures up 0.43%, Nikkei 225 futures rising 0.48% and Hang Seng Index up 0.12%. In news headlines, Adani Group has got a reprieve from a $2.5 billion share sale, which may help a rebound in Asian stocks today.

  • All the 11 sectors in the S&P 500 finished higher, with Energy, Consumer Discretionary and Material leading gains, both up more than 2%. The other growth sectors, including Communication Services and Technology, also rose by 1.3%. Mega-cap companies all closed in the green, up between 1- 3%.
  • Snap’s shares tumbled 14% in after-hours trading amid a miss on Q4 revenue and user growth expectations, despite a beat on earnings per share (EPS). The company reported $0.14, beating an estimated $0.11 in EPS. Unfortunately, Snap's revenue came in at $1.30 billion, missing the expected $1.31 billion. Snap's global daily active users for the fourth quarter are 375 million, less than an expected 375.3 million, despite a 17% year-on-year growth. Snap’s sales rose 12% in 2022, which is the company's worst performance on record so far.
  • General Motors’ shares jumped 2.8% amid strong Q4 earnings and positive guidance. The carmaker reported earnings per share as $2.12 on $43.11 billion in revenue, topping analysts’ estimates of $1.69 and $40.65 billion. It provided better-than-expected guidance for 2023.
  • The EU’s economy unexpectedly expanded in the fourth quarter, with the GDP growing 0.1% from the third quarter, better than an estimated 0.1% contraction. Also, the region’s GDP grew 1.9% from the same period a year ago, thanks to a decline in energy prices, which relieved economic activity. The regional stocks, however, closed marginally higher. Additionally, the Eurodollar reversed early losses against the USD, finishing slightly higher.
  • The New Zealand dollar fell after the country reported a rise in the unemployment rate, which printed at 3.4% in Q4, jumping from 3.3% in the prior quarter. This data might appeal to the RBNZ in its decision to slow down its rate hikes, though New Zealand reported another hefty CPI of 7.2% for the final quarter, unchanged from the third quarter.
  • Gold bounced off a session low as the USD pared early gains. Gold futures rebounded from the near-term support of the 20-day moving average at 1,900. However, the precious metal may still face challenges of the resistance level at the recent high of about 1,948. The Fed rate decision is a major risk factor that may cause price volatility for gold.
  • Crude oil reversed losses following the broad commodities’ rally amid risk-on sentiment as the Fed meeting looms. The better-than-expected China’s January PMI data may have also supported its upside momentum. The WTI futures faced a key resistance level of 82 and near-term support of around 75.

 


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