US stocks soared on Monday in choppy trading after steep losses in the previous session as easing Middle East tensions buoyed risk appetite, while investors looked ahead to an action-packed week with major tech earnings and a key inflation print.
The Dow Jones Industrial Average jumped 430 points, or 1.1%, to 38,417, the S&P 500 climbed 1.4%, and the Nasdaq gained 1.6%
The Nasdaq and the S&P 500 ended lower on Friday as Netflix shares weighed after a dour quarterly earnings report, with both the indexes suffering six straight sessions of declines last week, their longest since October 2022.
Some megacap growth stocks edged higher, with Alphabet, Amazon and Apple up between 0.3% and 0.7%.
Nvidia advanced 2.4%, rebounding from a 10% drop in the last session.
“This is an over-sold flash relief rally in the face of a market that has gotten a little bit ahead of itself. Traders are looking to scoop up a little bit of bargains,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.
Tesla, Meta Platforms, Alphabet and Microsoft will be in focus this week as the companies gear up to deliver their quarterly numbers. Their performance could further test the rally in US stocks.
The risk-on mode was also supported by signs of easing tensions in the Middle East, as Iran’s foreign minister said on Friday Tehran was investigating an overnight attack, adding that so far a link to Israel had not been proven as he downplayed the strike.
Equities have sold-off recently as market participants readjust their interest rate cut expectations from the Federal Reserve after a string of strong economic data signaling persistent inflationary pressures.
Money markets are now pricing in just about 41 basis points (bps) of rate cuts this year, down from about 150 bps seen at the beginning of the year, according to LSEG data.
On the docket this week would be the price consumption expenditure (PCE) index reading for March – the Fed’s preferred inflation gauge – to further ascertain the monetary policy trajectory.
Fed policymakers were in a media blackout ahead of their latest policy meeting on May 1.
Among single stocks, Tesla fell 4.3% as the electric vehicle maker cut prices in a number of its major markets, including China and Germany, following price reductions in the US.
Cardinal Health shed 5.2% after the drug distributor said its contracts with UnitedHealth Group’s OptumRx, one of its largest customers, will not be renewed after they expire at the end of June.
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