Stocks rise a bit after indices post worst week of 2023 Story-level

The S&P 500 gained 12.20 points, or 0.3%, to close at 3,982.24, while the Dow Jones Industrial Average added 72.17 points, or 0.2%, to close at 32,889.09. The Nasdaq Composite rose 72.04 points, or 0.6%, to 11,466.98.

Union Pacific rose $19.45, or 10%, to close at $212.17 after the rail company said it would take pressure from an activist hedge fund and replace its chief executive.

Renewable energy companies Enphase Energy and SolarEdge Technologies each added more than 5%. Tesla continued to rally, rising $10.75, or 5.5%, to $207.63, bringing its 2023 profit to 69%.

Pfizer, which The Wall Street Journal reported was in talks to acquire the biotech company Seagen for more than $30 billion, was among the laggards in the index, down 97 cents, or 2.3%, to $40.78. Seagen,

that helped pioneer a class of cancer therapy known as conjugated antibodies that attack tumors with toxic agents, increased $16.79, or 10%, to $178.16.

Stocks have been under pressure this month as economic data has forced investors to rethink expectations that easing inflationary pressures will allow the Fed to end its aggressive interest rate hikes soon. Instead, investors have reinforced bets that Fed policy rates will rise well above 5% and are bracing for more volatility in global markets.

Treasury yields eased on Monday, with the yield on the 10-year US note falling to 3.921%, from 3.948% on Friday. The yield on the 2-year note, which is more sensitive to expectations about Fed policy, traded at 4.791% after settling at 4.803% on Friday, its highest level since July 2007.

James Rutherford, head of European equities at Federated Hermes, said that while recent inflation surprises have roiled markets, the sell-offs have been relatively short-lived.

“Last week some of the data scared people and yields went back up. But here we are on Monday morning and, in fact, all of that has been forgotten,” Mr Rutherford said. “People are a little hardened and understand that rates can go a little higher…but the market isn’t looking at next month’s inflation data, it’s looking at six months or nine months or even 12 months.”

Through Monday, the S&P 500 was up 3.7% on the year while the Nasdaq Composite gained nearly 10% as tech stocks like Apple and Meta continue to post big gains. The Dow blue-chip has lost 0.8%.

Some money managers say individual stock picks are gaining importance after years in which investors could ride bullish indices fueled by a few large-cap U.S. stocks with great growth potential. Higher interest rates have increased the opportunity cost of paying for expected future earnings.

“Instead of the market being driven by five, 10 stocks, it will now be driven by the other 490 stocks,” said Derek Izuel, chief investment officer at Shelton Capital Management. “That gives active managers a lot more room to find high-performing stocks and beat their benchmarks.”

The highest yields in 15 years and growing economic uncertainty are prompting wealth managers to look beyond volatile stocks and put more client money into income-producing securities such as government bonds and investment-grade corporate debt.

“We’re skewing the margins toward fixed income,” said Daniel Berkowitz, chief investment officer at Prudent Management Associates, whose clients include wealthy families and endowment funds. “We’re not actively selling stocks, but we like the relative attractiveness of bonds.”

Monday added more mixed signals for investors. US durable goods orders fell 4.5% more than expected in January, although new orders for non-defense capital goods excluding aircraft, a closely watched indicator for business investment, they increased by 0.8% compared to the previous month.

Meanwhile, the housing market showed another sign that it is thawing, as pending home sales rose in January for the second straight month, up 8.1% from December, the National Association of Realtors said on Monday. The Fed has made slowing down the red-hot pandemic housing market with higher borrowing costs critical to its fight against inflation.

Investors will also be watching this week’s data on US manufacturing and services and European inflation.

Actions abroad were mixed. The Stoxx Europe 600 finished up 1.1% and the UK’s FTSE 100 added 0.7%. Asian stocks fell, with Hong Kong’s Hang Seng shedding 0.3% while Japan’s Nikkei 225 fell 0.1%. South Korea’s Kospi Index declined 0.9%.

In commodities, Brent crude futures, the global gauge of oil prices, shed 0.9%, or 71 cents a barrel, to settle at $82.45. The US benchmark slides to $75.68 a barrel. US natural gas prices continued their roller coaster ride, rising 7.2% to $2,731 per million British thermal units.

Email Ryan December at ryan.dezember@Story-level.com and Chelsey Dulaney at chelsey.dulaney@Story-level.com