Wall Street rallies to end higher on Alphabet, Netflix lift
NEW YORK – US stocks rallied to close higher on Friday, as the S&P 500 and Dow snapped a three-session losing streak and the Nasdaq rose more than 2 per cent, as quarterly earnings helped lift Netflix, while Google parent Alphabet climbed after announcing job cuts.
Shares of Netflix Inc jumped as the streaming company added more subscribers than expected in the fourth quarter and said co-founder Reed Hastings was stepping down as chief executive.
Netflix’s quarterly report comes as the technology and other growth-related sectors face hurdles due to the rising interest rate path of the US Federal Reserve and recession worries that have led companies such as Microsoft Corp and Amazon.com Inc to lay off thousands of employees.
Alphabet Inc was the most recent company to announce job cuts as it said it was cutting 12,000 jobs, sending shares higher.
The gains sent the communication services index up more than 3 per cent as the top performer among the 11 major S&P 500 sectors, for its biggest daily percentage gain since Nov. 30.
High-growth sectors such as communication services were among the worst performing in 2022 and were notably weaker in the last few months of the year as investors gravitated towards stocks with high dividend yields.
“Today’s action is probably because we had three down days so it got into a little bit of an oversold position and they are just doing a little bit of bargain hunting today,” said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.
“If people are viewing an opportunity, if they are getting more comfortable with the Fed’s narrative… investors are starting to buy into that narrative and saying ‘OK that is the way it is, let’s look at the stocks that got really beaten up’ because the market is a discounting mechanism.”
According to preliminary data, the S&P 500 gained 72.93 points, or 1.87 per cent, to end at 3,971.78 points, while the Nasdaq Composite gained 285.41 points, or 2.63 per cent, to 11,137.68. The Dow Jones Industrial Average rose 326.74 points, or 0.99 per cent, to 33,371.30.
Comments from Federal Reserve officials have largely said they expect interest rates to climb to at least 5 per cent this year as the central bank continues to try and tamp down high inflation. On Friday, Fed Governor Christopher Waller said the central bank may be “pretty close” to a point where rates are “sufficiently restrictive” to cool inflation, which gave an additional boost to equities.
The Fed is largely expected to raise rates by 25 basis points (bps) at its Feb. 1 policy announcement.
Still, concerns about corporate earnings persist as the US economy shows signs of a slowdown and a possible recession.
Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.9 per cent for the fourth quarter, according to Refinitiv data, compared with a 1.6 per cent decline in the beginning of the year.
Gains on the Dow were curbed, however, by a fall in shares of Goldman Sachs Group Inc after the Wall Street Journal reported the Fed is probing the company’s consumer business. REUTERS